Curtis, Graham & Blatchford v. Leavitt (15 N.Y. 9, 1857)

Comstock, J.

It will be convenient to approach the questions in this case, having first an accurate notion of the rights and powers of the appellant as receiver of the North American Trust and Banking Company. His counsel have been understood to argue, in effect, that all possible objections to the million and first half million trusts are centred in him, constituting in the sum total a simple power to repudiate them, if repudiation were possible at any time, under any circumstances, and for the benefit of any parties —a power to be exercised without regard to the elements of which it is composed, and without inquiry whether the parties who will receive the fruits of its exercise could, in their own peculiar right, assert the particular objection which may be held fatal to those trusts. It is claimed that the receiver represents both creditors and stockholders, and so all objections derived from either and both of these sources are put together and urged with united force, although it may happen that one of these classes will take the entire benefit of objections which only the other class can make. Views of this sort are perhaps slightly encouraged by a generality of expression, in adjudged cases, which did not, in their circumstances, call for precision and accuracy.

The receivership in question was constituted under sections thirty-nine, forty and forty-one of the Revised Statutes, concerning “ Proceedings against corporations in equity.” (2 R. S., 463,464.) Under those statutes, any creditor or stockholder of a banking corporation may commence a suit in equity for the causes therein enumerated, and the court may issue an injunction, and “ appoint one or more receivers to take charge of the property and effects of the corporation,” with authority to recover the debts due to it, and “ the property that may belong” to it. The next section declares that “ such receiver shall possess all the powers and authority” conferred by article third of the same title'upon receivers appointed in case of the voluntary dissolution of a corporation. According to art. 3, secs. 67, 68, receivers appointed om voluntary dissolution “ are vested with all the estate, real and personal, of such corporation” — “as trustees for the benefit of creditors and stockholders,” and they are declared to.have all the power and authority conferred by law upon trustees of the estates of insolvent debtors, under the provisions of part 2, chap. 5, of the Revised Statutes. According to those provisions (2 R. S., 41, §§ 6, 7), trustees of insolvent debtors are “ deemed vested with all the real and personal estate of the debtor,” and they have “ power to sue, in their own names or otherwise, and recover all the estate, debts and things in action belonging or due to such debtor, in the same manner and with the like effect as such debtor might or could have done, if no attachment had been issued or trustees appointed.”

The appellant, as receiver, has no interest in or power-over the property affected by the trusts in question, except such as he derives under the statutes which have been mentioned. It has been said in this, as in other cases, that he represents the creditors and the stockholders, but for all the purposes of inquiry into his title, he really represents the corporation. He is by law vested with the estate of the corporate body, and takes his title under and through it. It is true, indeed, that he is declared to be a trustee for creditors and stockholders; but this only proves that they are the beneficiaries of the fund in his hands, without indicating the sources of his title or the extent of his powers. If, then, in a controversy between the receiver and third parties, in respect to the corporate estate, it is possible to form a conception of rights, legal or equitable, belonging to the shareholders as individuals, which the corporation itself could not assert in its own name, the receiver does not represent those rights. So far as shareholders are concerned, he can litigate respecting the fund upon precisely the grounds which would be available to the corporation, if it were still in existence, solvent, and no receivership had been constituted. In regard to creditors, I should certainly incline to take the same view of his rights and powers ruder the statutes referred to. It has, however, been uniformly assumed, and was not denied on the argument, that he succeeds to the rights of creditors, and takes his title under them, where conveyances have been made in fraud of their rights, but otherwise valid. In such cases, he holds adversely to the debtor corporation. For all the purposes of the present controversy, I shall proceed upon this assumption.

In general, then, a receiver of this description takes merely the rights of the corporation, such as could be asserted in its own name, and on that basis only can he litigate for the benefit of either stockholders or creditors, except when acts have been done in fraud of the rights of the latter, but valid as to the corporation itself. In this particular case, it will readily be seen that the controversy is still further reduced, in respect of parties interested, to a mere question between the Palmers and others, holding the bonds secured by the two trusts, and the general creditors, claiming to annul those trusts and to share in the property embraced therein. On the part of the receiver, it has been strenuously argued that the corporation was insolvent when the trusts were created. If not, then its insolvency afterwards and at the present time has not been denied. If by repudiating the debts, or the greater portion thereof, something might be left for the shareholders, the decision which we pronounce in another branch of the case renders that result impossible. Following the principles laid down in the case of the State of Indiana ( Tracy v. Talmage, 4 Kern., 162), and applying them to this controversy, we determine that the debts of the corporation cannot be repudiated upon any of the grounds which have been urged. It becomes absolutely certain, therefore, that the claims of creditors, including the bondholders, greatly exceed the entire value of the corporate effects. For this reason, if no other, the shareholders or individuals may be regarded as strangers to the controversy. The rights of creditors only are really in question.

The observations, so far made, lead not inappropriately to a general classification of the objections urged by the receiver against the validity of the million and first half million trusts. They are : 1. Those which assume that the trust conveyances are null and void to all intents, so that the corporation itself could at any time repudiate them ; 2. Those which assume them to be void only as to creditors, on the grounds of fraud or illegal preference. Among these-I include, conventionally, the objection that they were made for the “ use of the grantor.” In respect to the first class, the claim of the creditors, and consequently of the receiver, is under and through the corporation, and it rests on no other basis. In respect to the second, their claim 'is adverse, because it overreaches transactions valid against the corporation itself. I will now consider the several objections, proceeding according to the classification here suggested.

I. And first, then, it is claimed that both of the trusts are void, under section eight of the statute “to prevent the insolvency of moneyed corporations” (1 R. S., 588), because they were not authorized by any previous resolution of the board of directors. That statute declares that no conveyance, &c., not authorized by such a resolution, “ shall be made by any such corporation, of any of its real estate or of any of its effects exceeding the value of one thousand dollars.” The next clause in the section makes certain exceptions not material to the question; and the concluding one declares that the conveyances, &c., shall not be rendered “ void in the hands of a purchaser, for a valuable consideration and without notice.” Conceding that no previous resolution of the directors was in fact adopted, sufficient in its terms to authorize either of the trusts, some of my brethren are of opinion that they can be sustained on the ground that the holders of the trust bonds are bona fide purchasers, and so within the protection afforded by the last clause of this statute. While I do not dissent from their views in this respect, I shall place my own conclusion mainly upon another ground, and three of my brethren concur with me in so doing.

In accordance with what seems to have been the opinion of one of the judges in this court, in Gillett v. Moody (3 Comst., 486), opposed to his well considered decision in another tribunal (Gillett v. Campbell, 1 Denio, 520); in accordance, also, with a resolution concurred in by a majority of the judges, in Tulmage v. Pell (3 Seld., 328), after that case had been disposed of on other grounds ; and with a decision somewhat more directly involving the question, in a case quite recent ( Gillett v. Phillips, 3 Kern., 114), where the point was neither argued by counsel nor considered by the court, I shall assume that banking associations, organized under the general act of 1838, are brought within the statute under consideration and within other provisions of the same title. I must observe, however, in passing, that this is an assumption opposed to the clearest convictions of my own mind; and that, if it were necessary in the determination of a controversy so important as the present, I should feel bound to inquire whether a doctrine which appears to me so plainly erroneous is irreversibly settled.

The objection we are now considering does not deny that the corporation had power to create the trusts. It only insists they were created in the corporate name and under the corporate seal by certain subordinate agents, who acted without due authority from their principal, and hence that they are void. If we may apply to the question the most familiar of all the doctrines of agency, such an objection cannot prevail, provided the principal at the time approved or afterwards ratified the act of its agent. The ratification need not be declared in express terms. Mere silence and acquiescence will in many cases be sufficient So it may be inferred from the acts and proceedings of the principal in pais When he receives and. appropriates the proceeds of a transaction done in his name and by his assumed authority, there exists the highest possible evidence of his approval. These rules are elementary, and are founded on the simplest ideas of justice in the dealings of men. They are also as plainly applicable to corporate as to other transactions, where the dealing is within the powers of the corporation. In such a case, no possible reason can be suggested why a corporate, as well as a private, principal is not bound by the dealings of its agent, which it has approved, and the benefit of which it has received and appropriated.

To these principles, so simple and so just, the receiver’ counsel oppose the peculiar language of the statute. The requires, as they argue, a previous resolution of the directors and they insist that the assent of the corporation to tho trust conveyances could not be given at any other time or manifested in any other manner; and the conclusion from this argument is, that the trusts must be annulled, however formally assented to at the time or afterwards, and even although the corporation actually received the proceeds thereof, amounting to over a million of dollars, and applied the moneys to its use in the payment of its debts and otherwise. If these views are justified by the statute, then, as to all the moneyed corporations of this state, principles of hitherto universal application, and founded in the plainest justice, are no longer in force. I cannot bring my mind to the conclusion that such was the intention of the legislature.

The precise object of the statute was to prevent fraudulent and improper transfers of the corporate effects by officers of the corporation acting without the sanction of the board of directors. It was simply in restraint of their authority and of their acts that the statute was enacted. It was not intended in any wise to abridge or restrain the power of the corporations themselves, as represented by their directors, over their effects, or to confine them to any special mode or particular time of manifesting their will in the disposition of their property. The officer or particular agent who undertakes to dispose of the corporate estate, or any part of it exceeding one thousand dollars in value, must take his authority under a previous resolution of the directors. If he has no such authority, his act, standing alone and unsupported by any sanction, is void: just as the unauthorized act of any other agent is void as against his principal. But the corporations themselves, like other principals, may, nevertheless, act and be bound in any of the modes not opposed to the general rules of law applicable to such bodies. They may previously resolve; they may subsequently acquiesce; they may expressly ratify; they may intentionally receive and appropriate the proceeds of the unauthorized transaction, and so put it out of their power to dispute its validity. It is true the literal reading of the statute is, that no conveyance, &c., “ shall be made” without a previous resolution of the directors. But supply the words, “ by particular officers or agents of the corporation,” evidently implied in the whole scope and meaning of the section, and irresistibly suggested by the object the legislature had in view, and the whole difficulty disappears. Primarily, no doubt, the meaning of a statute is to be sought for in the language used, but that must be' read with a due attention to the subject matter of the enactment, and to the general or particular end to be attained or mischief to be remedied. More than all, we ought not, unless compelled, to adopt a construction which would impute to the legislature an extreme and absurd intention, such as would be a design contrary to principles universally received in any other "dealings, to take from corporations the power of giving effect in any possible mode of conduct to acts lawful in themselves and within their charters, but defective only because they were not within the authority of the particular agent who assumed to perform them.

Very different, I am pursuaded, were the intentions ,of the legislature. At the time this statute was passed, it was well known that moneyed corporations, besides their boards of directors, had presidents, cashiers and committees. It was also well known that these officers or particular agents might assume, and in fact that they did sometimes assume, to transfer the corporate effects, without any authority derived from the boards of directors. The power thus exercised was liable to great abuses, and experience had already exhibited such abuses. The legislature, therefore, struck directly at the power, and declared that it should not be exercised at all. The statute should therefore be interpreted, not as designed to abridge a single power which the corporations would possess if it had not been enacted, or to cripple them, and through them their creditors, in any of the modes of action by which they could bind themselves, but simply to protect them against the acts of their officers or agents, done without their authority. Quite consistently with this intention, they can bind themselves by approval and confirmation, expressly declared or implied from their conduct, although the previous authority was wanting. No one surely will contend that, upon general - principles, a corporation cannot confirm any dealing or transaction which is within the reach of its powers, and which, therefore, it can originally authorize. A different doctrine would be a singular anomaly, which I do not think this statute has introduced.

Upon these views I prefer to rest my conclusion on this branch of the case. The North American Trust and Banking Company never questioned the validity of these trusts; on the contrary, we have the very highest evidence that it approved them. The deeds were executed in the name and under the seal of the corporation. Regarded as the acts simply of the officer who signed them, they were void (so I assume) under the statute; but, almost contemporaneously with the execution of the deeds, the company itself sold and pledged the bonds which the conveyances were made to secure, received the proceeds and used the same in its dealings. These bonds were taken by parties who, it is not denied, acted in ignorance that the trusts were not authorized by a previous resolution, and who, as subjects of a foreign country, are not even chargeable with notice of the statute which it is supposed required such a resolution. I do not by any means say that a foreigner, any more than a citizen, can enforce in our courts a title to property here, acquired in contravention of our laws. The contrary is plainly true. But when the question is one of fair and honest dealing, our statutes are usually to be regarded as facts of which the foreigner is presumed to have no knowledge. I am not, however, seeking to introduce here the doctrine of equitable estoppel, but put my conclusion, as before stated, on the competency of the corporation to confirm the trusts in any effectual mode of corporate action, a competency which this statute was never intended to destroy; and I refer to the good faith of those dealing in the bonds, in reliance upon the trusts, for the purpose of showing what great injustice would result if we were to adopt the opposite view.

The trusts being valid as against the corporation, so far as the objection considered is concerned, the receiver cannot repudiate them for the benefit of creditors. In the absence of fraud, a creditor holds under and through his debtor, and is concluded by all the valid acts and assurances of the latter. (Candee v. Lord,, 2 Comst., 275.) This principle is just as applicable to a corporate as any other debtor. Whether the trusts were fraudulent as to creditors is a distinct question, having no connection with the one which has been examined.

II. I come next to the objection that banking associations formed under the general law of 1838, have no power to borrow money, and hence that this corporation could not issue its bonds, create the trusts, or give any valid assurance for a loan. This is a very grave proposition, opposed to the known practice of probably every banking institution in the state. It should, therefore, be well considered before it is received as the law. The question, it should be observed, in the form now presented, is one of simple capacity to borrow at all, and not whether the power was abused or even transcended by the North American Trust and Banking Company. If the power is found to exist, the question whether this' company went beyond it in the particular scheme of which these trusts formed a part, and what are the consequences of such excess, might form a distinct branch of inquiry. It is proper also to observe, in this connection, that the authority to receive deposits, specially enumerated among the powers of these institutions, is not the one of which I am speaking. A general deposit in a bank, in its exact legal result, is a loan of money (Chapman v. White, 2 Seld., 412); yet it may be true, as my learned associate, Judge Selden, thinks, that a power to receive deposits is not a power to borrow money in the more general and appropriate sense of those words. I proceed, now, to some examination of this objection to the trusts in question. •

Banking is not in its nature a corporate franchise. In the absence of legislative restraints, it may be carried on by individuals and partnerships in all its departments of issuing, lending, receiving deposits, discounting, dealing in exchange, bullion, &c.; and in examining the powers of banking corporations, the nature and incidents of banking as a business, when not under special legal restraints, are in the highest degree important. It is true the question will always be one of corporate power rather than of the rules and principles of banking; but those rules and principles may have a decisive influence in the construction of charters which profess to confer powers of this description. And this leads me to observe that banking, regarded as á business and not as a franchise, includes the borrowing of money as one of its features or incidents. As no one-denies-this proposition, I will not dwell upon it further than to quote the remarks of an eminent English judge, Hr. Pemberton Leigh, Chancellor of the Duchy of Cornwall, in a late case in the privy council ( The Bank of Australasia v. Breillat, 6 Moore’s P. C., 152, 194). He observed: “ The nature of a banker’s business, especially if the bank be one both of issue and deposit, necessarily exposes him to sudden and immediate demands, which may be to the extent of a large portion of his debts, while his profits are to be made in employing his own moneys and those intrusted to Mm in discounting bills, in loans and other modes of investment. It is impossible that he should always have his assets in such a state as to be applicable immediately to the payment of all demands that may be made upon him ; and if a partner has no power, under such circumstances, to borrow money for the partnership, either the assent of each individual must be obtained, which is impractible, or the concern must be ruined. We have no doubt at all, therefore, that in ordinary banking partnerships such power exists, and that the. directors, by the terms of their appointment, have all the general powers, and, among the rest, the power of borrowing, unless such power is excluded by other provisions of the deed.” It may be quite material, when we come to examine the general banking act of 1838, to observe now, in passing, that in these observations, so just and forcible, the borrowing of money is spoken of, not as a distinct department or branch in the business of banking, but is asserted as the incident and result of two of its most important operations: those of issuing and receiving deposits. The opposite idea, I think, will presently appear to be a source of error in conclusions on this subject.

If, then, a number of persons should associate themselves together as bankers, in the recognized modes of carrying on that business, it will be, and, as I understand, it is admitted that the managing partner or partners, or any general and unrestricted agent, could bind the firm by engagements contracted for moneys loaned, without a specification of the power in the partnership deed. I consider it, moreover, to be plain, that an association which has filed the proper certificate, under the law of 1838, and so become incorporated. has precisely the powers, direct and incidental, which a mere partnership would have if all the provisions of that act, supposed to confer powers or to restrict them, were inserted in the articles of agreement, and providing there were no other restraining laws. I have, indeed, no hesitation in calling these associations partnerships, although they have also so many of the peculiarities of corporations that the courts of this state have quite uniformly held them to be such, upon most questions which have arisen concerning them. I broadly admit them to be corporations, but they are also associations or partnerships. I admit, also, that they take their powers under the organic act, but so do partnerships under their articles. What I assert is, that the measure of power would be the same in both cases, if conferred in the same terms. Corporations, I .admit also, can only exercise the powers expressly or incidentally conferred. It scarcely needed a statute of this state to declare a principle of the common law so familiar; and there is nothing in the terms of the statute (1 JR. 5., 600, §3), quoted with so much emphasis, to give greater intensity to the doctrine.

Let us then suppose all statutes prior to 1838, in restraint of banking, to be done away, and a mere partnership formed under articles, reciting an intention to pursue “ the business of banking,” and declaring that the associates would, under a certain name, carry on that business in or by the issuing of circulating notes, receiving deposits, discounting bills, dealing in exchange, bullion and coin, and loaning money on real or personal security. I know of no broader terms in the English language to define “ the business of banking;” and would any one, who admits that the borrowing of money is included in that business, deny that the power would be embraced as the incident of some or all of the operations enumerated ? And yet, in this supposed language of a partnership agreement, we have the organic law of 1838. In the title of the act the intention is declared “ to authorize the business of banking.” In the first fourteen sections the issuing power is granted without limit, but under very peculiar and exact regulations, framed to protect the currency and afford to the billholder, in the securities provided, an absolute certainty of ultimate redemption. In the 18th section, all the remaining banking powers of which I have ever heard are conferred. It declares that “ such association shall have power to carry on the business of banking, by discounting bills, &c., by receiving deposits, by buying and selling bullion, coin and exchange, by loaning money on real and personal estate, “ and by exercising such incidental powers as shall be necessary to carry on such business.” Now, if a mere partnership, such as I have supposed, could borrow money, and the act would not be ultra vires if done by those in the direction of the business, how, it may well be asked, would the same association lose that power by merely making and filing a certificate according to the 16th section of the banking law, but without any other change in its organization? It is not the banking powers, let it be remembered, which turn the association into a corporation. The capacity of perpetual succession, the power of suing and being sued, of contracting in the particular name selected, of having, a common seal, of making by-laws, &c., are the incidents which, in the judgment of the courts of this state, have invested these associations with a corporate character. ( Thomas v. Daken, 22 Wend., 9; Warner v. Beers, 23 id., 3 03.) The banking powers conferred are not, either in their nature or extent, changed or affected by this conclusion of the courts, the soundness of which I do not question.

If, so far, I have differed from those who deny the power in question, I think the difference is in the mode of statement rather than in principle. The objection to the power is, after all, really made to turn on the terms of the banking law itself; and many of the preceding observations have been made in order to approach the construction of those terms through the usages and necessities of banking as well as that through the technical law of corporations in general.

We come then to the question of construction, which to my own mind presents no difficulty. The argument on the other side urges that “ the business of banking” is authorized by the 18th section, only according to the specifications therein contained, among which the power to borrow is not found. To this the answer is, that these specifications, with the issuing power granted in the previous sections, cover the whole ground of banking. If the statute had omitted the general terms “business of banking,” and had merely enumerated the power of issuing, and all the others named in the 18th section, that would have been a general grant of banking powers, including, as their incident, the right to borrow money when a necessity may arise in the exercise of those powers.

To deny this conclusion is necessarily to assume (and it seems to be assumed, perhaps unconsciously) that borrowing is an independent operation in the business of banking; in other words, that it is banking in one of its branches, and hence that the power cannot exist without a particular specification. This is, I think, plainly an error; and yet it appears to lie at the foundation of the opposing view of the present question. Now, in a very simple and elementary view of the subject, borrowing is not banking, nor is it in a just and proper sense any other kind of business. It is the incident and auxiliary of various kinds. Let us test this. If a person should open and keep an office for receiving deposits payable on demand, he would carry on a well known branch of banking business, although he might use the deposits in speculation or other modes totally unconnected with banking. He would be a banker. So if he were to keep an office for issuing his own circulating notes, or for dealing in exchange, or for discounting bills, and should actually carry on either of those operations without the others, he would exercise a banking power, although confined to a single one. But suppose he keeps an office and habitually borrows money on time, which he uses in manufacturing or some other branch of industry: was it ever-supposed that such a practice made a man a banker ? In truth he performs neither a banking nor a manufacturing operation, but one which is simply auxiliary to the business in which he is engaged. A banking corporation, therefore, when it borrows money, exercises an incidental and auxiliary power, not expressed, but implied from those which are expressed. On this ground the English Privy Council proceeded in the case of the Bank of Australasia v. Breillat (sufra), as will be seen in the extract quoted above from the opinion in that case. The right to borrow was not among the specifications in the deed, but was referred to the powers of issuing and of receiving deposits, which were specified. If these views are correct, they would seem to be decisive, for in the act of 1838 all known express banking powers are enumerated.

The course of bank legislation in this state leads to the same conclusion. In the charters prior to 1825 there was no enumeration of the banking powers, but in that year the Commercial Bank of Albany was chartered, “ with all incidental and necessary powers to carry on the business of banking, by discounting bills, &c.,” proceeding with the same specifications as in the act of 1838, now under consideration. This was the model of a vast number of charters down to and including the year 1836, when special legislation of this kind ceased. Now, it is a fact not at all remarkable, but very pertinent to the present question, that in no special bank charter ever granted in this state was it thought of to specify the borrowing of money as one of the substantive and express banking powers. Yet I am not aware that it was ever before suggested that the right to borrow was excluded by the enumeration of those powers.

Those specifications were evidently intended not to restrict the appropriate business of banking, but as a mere legislative definition of that business; a definition not indispensable, perhaps, but eminently useful, because it left nothing to construction or in doubt. Even the restraining laws may be referred to in corroboration of these views. Corporations, not expressly incorporated for banking purposes, were prohibited from exercising banking powers under a specification precisely like that found in all the special bank charters and in the general charter of 1838. (1 R. S., 712, §§3, 6.) Indeed, it would be difficult to conceive a greater absurdity than a prohibition against borrowing money in a statute intended merely to restrain unauthorized banking.

Again, suppose a corporation were chartered under a special or general law for manufacturing purposes, with a particular authority to borrow money whenever deemed necessary in the business: would that be considered a grant of one of the banking powers ? Plainly not; and quite as plainly it would be, if the authority were to receive deposits or discount bills, or issue circulating notes.

Under these views, it is not very important to answer the question, Why did the legislature of 1838 specify the express powers which it was intended to confer, instead of leaving them to be derived from the general grant to carry on “ the business of banking?” That legislature surely might copy the language of its predecessors since the year 1825, without affording any occasion for imputing to it the special intention of excluding a well known incident of that business. Still the question is not difficult to answer. In the restraining law of 1830 (1 R. S., 712, §6), it was declared to be unlawful, without express legislative authority, to keep offices of deposit, discount, &c. The act of 1837 (Suit., p. 14) removed this restraint only in favor of persons and associations not incorporated. In order, therefore, to confer upon associations; under the act of 1838, the powers of discount and deposit, it was necessary to specify them. This, it is true, is a reason which does not apply to the other powers enumerated. But a specification of these two only would have furnished pretty strong ground for the very inconvenient inference that the others were intended to be excluded. If the statute had read : “ Such association shall have power to carry on the business of banking, by discounting bills and receiving deposits,” the rule “ expressio unius exclusio alterius ” would have been of very dangerous import to the right of dealing in exchange, bullion and coin. In short, the existing state of the restraining laws rendered it necessary to specify some of the express powers intended to be granted, and those alone could not be specified and the others safely omitted.

We arrive then at the conclusion that the North American Trust and Banking Company had capacity to borrow money as incidental to the banking business and the powers expressly granted. But the objection takes another form. It has been urged that these associations cannot borrow money as a substitute for capital. If by this proposition it is only meant that these institutions, having no capital subscribed at all, cannot lawfully procure it upon loan and so make a total substitution of credit for capital, the doctrine has no precise application to the present case; for this company had an actual capital of some $3,000,000 subscribed and paid, and it is not denied that the subscriptions were paid in a manner which the law permitted. It is remarkable, however, that there is no provision in the law requiring a single dollar to be paid by the shareholders. The association must, in some way, whether upon credit or with capital, procure mortgages and stocks, and deposit them with the comptroller of the state, in order to secure the ultimate payment of its circulating notes, if it issues any. But it is not compelled to exercise the issuing power at all; and if it chooses not to do so, then it has no occasion to procure or deposit the securities, and it will have no circulation to redeem in cash. It may confine itself exclusively to the banking operations of deposits, of discount, &c., specified in the 18th section; and there is certainly nothing in the act which prohibits carrying them on with borrowed capital. An individual banker can certainly do this. So can a partnership which has no corporate privileges. And why then cannot a partnership which has power to incorporate itself and does so under a general law? Corporations, it is said, can act only in accordance with the law which creates them. But if the law authorizes them to do acts specifically, and is silent as to the manner and means of doing those acts, where is the restriction, except such as the nature of the business implies ? Banking, I repeat, is a business and not a franchise. The public have a special concern in the circulation only, and that is guarded in the act of 1838 by a series of very peculiar and exact provisions. Beyond that, I have no doubt the legislature intended to leave the business essentially free. It allowed all persons to associate, to become incorporated by their own act, and it conferred the most ample banking powers, without a single restriction in the use of those powers. And this view derives additional strength when we consider that by a legislative act in the previous year all restraints upon banking, except those intended to protect the currency, had been abolished in favor of all persons and mere associations, and the business thrown open to them without restriction. ( Slat, of 1837, j>. 14.) Now it may be true that, in point of public policy, associations in the banking business which have filed a certain certificate, and so incorporated themselves, ought to be under some legislative restraint in the power to borrow money in that business; but whatever argument can be adduced to prove this, the same argument will establish incontrovertibly that banking should be altogether prohibited to individuals and mere partnerships, for in them the power to borrow is confessedly unrestrained. Such I say may or may not be sound public policy, but these were not the views which prevailed in 1837 and 1838, or since that time, nor was it the policy of the legislature of those years. For proof of this we need only to look at their acts. The statutes of 1837 removed the restraints upon banking (of course I do not speak of issuing bills for circulation), and thus by necessity connected it with the most unlimited power of borrowing by individuals and associated bankers. Such became from that time the policy of the state, whether wise or unwise is not the question. The act of 1838, so far from interfering with this policy, carried it still further into the issuing department, requiring only that the associated bankers should incorporate themselves in the manner provided, as the condition of exercising that power also, and that both individuals and associations should deposit a perfect security and receive from the comptroller their circulating notes. In those conditions, I confidently affirm, are to be found the only remaining restraints upon the business of banking left by the act of 1838. Whoever, therefore, invokes public policy for the purpose of finding a restriction of the right to borrow in the course of that business, in order to render himself intelligible, should refer to his own private views,

< and not to the actual policy of this state.

If we admit, then, that these associations can borrow, and I trust this has been shown, I do not see in what quarter we are to find restraints upon the power, so long as it is exercised in the course of that business. The right exists as the incident of banking, and beyond that it cannot be exercised without transcending the limit of corporate power. The act of borrowing for objects not within the general scope of that business would be ultra vires. But if the power exists, we cannot say that the lending contract is void, because the occasion for the loan arises out of a course of merely imprudent and hazardous dealing. This particular company, no doubt, carried its credit to extraordinary lengths, and it may even be true that its embarrassments arose out of speculations in stocks or other transactions not within its powers. But its debts, in the forms they had assumed when the million and half million trusts were created, so far as they have come under our consideration, and particularly its great debt to the Palmers, were legal and valid. So we adjudge in that branch of the controversy. The necessity of paying these debts was therefore a banking necessity. Without going back to original transactions in this country, which may have been ultra vires or illegal, the creditors of this company, and chiefly the Palmers, had advanced immense sums upon its bills of exchange, and in redeeming its certificates of deposit and debentures ; and these advances, as we determine, constitute legal and just debts. Those the company were bound to pay. Even if we admit that a large amount of outstanding obligations, not yet due, were illegal or prohibited in their form, still the holders who had advanced money thereon were entitled to recover it. This was determined in the Indiana case. How, if a bank may not borrow money when it cannot otherwise meet its pressing engagements, and must go into insolvency if it does not meet them, I know not what exigency will justify a resort to the borrowing power.

The conclusions at which we arrive, affirming the right of banking institutions to borrow money, and sustaining its exercise in the case before us, do not necessarily result in the doctrine laid down by a very able judge, assistant Vice-Chancellor Sandford, in the case of Barry v. The Merchants' Exchange Company (1 Sand. Ch. R., 280, 289). That case, however, should not be overlooked in this discussion, because it asserts a principle which more than covers the ground now in controversy, and because the same question afterwards arose in this court. The Merchants’ Exchange Company was chartered with a capital of SI ,000,000, for the purpose of building an exchange in the city of Hew-York. After the first erection was destroyed by fire, the corporation purchased more land and rebuilt on a larger scale, at a total cost of over $2,000,000, but without any increase of the capital. There was no authority to borrow money expressed in the charter, but the entire expense, over and above the amount of the capital, was defrayed by means of loans procured upon the corporation bonds, secured by one or more mortgages executed in trust to Mr. King. The great question in the case was upon the power of the company to contract the loans and to secure them by the bonds and the trust mortgages, and the power was affirmed. The precise doctrine of the case is stated in the following language of the assistant vice-chancellor: “A corporation, in order to attain its legitimate objects, may deal precisely as an individual may who seeks to accomplish the same ends. If chartered for the purpose of building a bridge, it may contract a debt for labor, the materials, or the land upon which the bridge is abutted. If more advantageous, it may borrow money to purchase such land or materials, or to pay for such labor; and, as the evidence of the indebtedness, it may execute to the creditors a note, a bond or a mortgage, whether the debt be for the money borrowed, or the work, materials or land.” The question was also before this court, in the case of King v. The same Corporation, upon the very same exercise of power (1 Seld., 547); and the objection, that the company had no authority to borrow money, was distinctly presented on the argument. The point seems also to have been necessarily involved in the case. The decree of the supreme court of the city of New-York was affirmed, thus establishing the validity of the trust mortgages made to secure the loans. In the opinion of the court, the objection made to them under the statute of uses and trusts is .the only one discussed; but the one which alleged the want of power to borrow money was equally involved. It must have been disposed of by including it among what are called, in the opinion, “ various minor objections, which did not require a particular notice.” I do not regard such a decision as conclusive upon us when it can be shown to be wrong. It would not, however, be respectful to those who -were then members of this court to suppose that this question escaped their notice, for it was distinctly involved in the case, and was called to their attention on the argument. The decision is, therefore, at least high evidence of what they understood and assumed the law to be.

But can these decisions be shown to be wrong upon principle or authority ? I confess my own inability to refute the doctrine so perspicuously laid down by Assistant Vice-Chancellor Sandford. I am not aware that it comes in conflict with any known distinction between private person i and corporations. It is true that the latter take all then powers, direct and incidental, under their charters; but when the direct power is granted in terms, they take it, as natural person enjoys it, with all its incidents and acces series. A simple association of merchants to build an exchange, could, if they so agreed with each other, very appropriately borrow money in furtherance of the object; and why can they not, if they take the principal power under a charter from the government, which enables them to act as a single person and with a collective will ?

It is truly said that corporations can only exercise such incidental powers as are necessary to carry into effect the express objects of their charters. But necessity is a word of flexible meaning. There may be an absolute necessity, a great necessity, and a small necessity; and between these degrees there may be many others depending on the ever varying exigencies of human affairs. It is plain that corporations, in executing their express powers, are not confined to means of such indispensable necessity that without them there could be no execution at all. The contrary doctrine would lead at once to a very great absurdity; for if there are several modes of accomplishing the end, neither one is indispensable, and each would exclude all the others. And thus, by inevitable logic, an express grant of power would lie forever dormant, because there are more modes than one of carrying it into execution.

It is almost as difficult to say that the incidental power depends for its existence on the degree of necessity which connects it with the power in chief. Such a doctrine would impose upon courts a never ending difficulty, for the inquiry would always be whether the chosen instrumentality is the very best that could be selected; and if not the very best, however minute the difference may be, then the inevitable decision must follow that the choice was fatally bad, although strictly adapted to the end in view and made in the utmost good faith.

These demonstrations, for such they appear to me, would seem to leave but one other conclusion, which is, that corporations, along with their specific powers, take all the reasonable means of execution, all that are convenient and adapted to the end in view, although not the very best by many degrees of comparison. And this'is a doctrine which must necessarily result in the liberty of choice amongst those means. The choice may be wise or unwise. If made in the exercise of an intelligent good faith, the wisdom of the selection may be called in question, but the power to make it cannot be.

T can therefore see no room for the distinction which admits the power of a corporation to contract a debt for labor and materials to be used in building an exchange, or a bridge, or a turnpike road, or in manufacturing, those being in each case the specified object of the charter, but denies the right to borrow money to be used in the purchase of the same labor and materials. If there be any reason for a distinction, resting on a comparison of benefit to the corporation, the advantages of borrowing would in most cases be undeniable. So, in point of public policy, the reason for that preference would appear to be still stronger, for while the industrial classes would require no protection, the money lenders could safely be left to guard their own interests. I believe the distinction referred to is not recognized by any adjudged case.

If these views in regard to trading corporations in general are sound, then our conclusion, which affirms the power of incorporated banks to borrow money, when not specially restrained, rests not only upon the peculiar nature and necessities of banking business, but upon a principle somewhat more comprehensive.

III. The trusts are also objected to on the ground that the power to borrow money could not be exercised in the particular mode of issuing the so-called million and half million trust bonds as assurances for the moneys advanced, and this point is next to be examined. This objection raises the following questions: 1. Is it within the power of corporations generally to issue instruments of this kind, when no prohibitory or restraining statute is violated, and the purpose or occasion of making them is lawful ? 2., Is there any express or implied prohibition, contained in the act of 1838 or in any antecedent statute, by which this company was bound ? There are no other aspects in which this objection can be presented, provided the bonds were issued prior to June 3, 1840, when another statute took effect. The time of their issue will be hereafter noticed.

The first of these inquiries can be briefly answered. The right of corporations in general to give a note, bond or other engagement to pay a debt is so nearly identical or so inseparably connected with the right to contract the debt that no doubt upon the question ought to be admitted. When a corporatioti can lawfully purchase property or procure money on loan in the course of its business, the seller or the lender may exact, and the purchaser or borrower must have the power to give, any known assurance which does not fall within the prohibition, express or implied, of some statute. The particular restriction must be sought for in the charter of the corporation, or in some other statute binding upon it; but if not found in that examination, we may safely affirm that it has no existence This doctrine would seem to be clear in principle, and it is well settled in this state. (Mott v. Hicks, 1 Cow., 513; Barber v. Mechanics' Ins. Co., 3 Wend-., 96; Jackson v. Brown, 5 id., 596 ; Moss v. Oakley, 2 Hill, 265; Attorney-Gcneral v. The Life and Fire Ins. Co., 9 Paige, 470; Safford v. Wykoff, 4 Hill, 442; Barry v. Merchants' Exchange Co., 1 Sandf. Ch. It., 280.) It would be a very illogical conclusion to hold that an indefinite number of corporations, authorized by a general law, do not possess the same right in this respect which they would have if the express powers of each were derived from a special charter.

In the second place, if there are any special legislative restraints, which in their terms or policy condemn the trust bonds, they are to be found in the safety fund act of 1829, or in the statutes against unauthorized banking, called the restraining laws, or in the organic act of 1838, from which this corporation derived its powers. There is no other particular legislation supposed to have any bearing on the question.

The argument of the receiver’s counsel, so far as it is derived from the safety fund act (Laws of 1829, ch. 94, p. 167; 1 R. S., 737, 3d ed.), turns wholly upon the thirty-fifth section of that statute, and may also be answered in few words. This was an act, applicable only to future banks and those whose charters should be renewed in future, requiring them to contribute annually, for six years, one-half of one per cent upon their capital to a fund specially pledged for the redemption of the circulating notes of insolvent institutions. The thirty-fifth section contains a prohibition against the “ issuing of notes and bills,” unless payable on demand and without interest. The evil intended to be suppressed by this prohibition was undoubtedly the practice of issuing post notes, designed and calculated to circulate as money. The provision is, however, broad enough in its terms to include all bills and notes payable at a future day, and so it has generally been construed. It is, however, in its very language, confined to banks “ subject to the provisions” of that act; in other words, liable to contribute to the safety fund thereby created. These trust bonds were issued by an association which, as we know, was not subject to the provisions of that act, and was therefore exempt from the operation of this particular section. This is a decisive answer to the objection in this form, and no discussion can make the argument plainer. I will add, however, iii this connection, that in enacting the general banking law of 1838, the legislature had this statute before them and refused to adopt it into their work. They refused not only to adopt this restriction, but any other indicating the same policy. The reason for this refusal, I think, we shall see when we come to look once more at the structure and policy of the system which they did adopt, and compare them with previous systems.

In further discussing the objection to these bonds we are to consider the restraining laws and the general act of 1838, and these matters are so connected that they must in some degree be examined together.

The statute of 1829 against unauthorized banking (1 R. S., 712), known as the restraining act, declares (§6) that “no person, association or body corporate, except such bodies corporate as are expressly authorized by law, shall keep any office for the purpose of receiving deposits or discounting notes or bills, or issuing any evidences of debt, to be loaned or put in circulation as money, nor shall they issue any bills or promissory notes or other evidence of debt as private bankers, for the purpose of loaning them or putting them in, circulation as money, unless thereto specially authorized by law.” Some of the other sections in the same act are intended to promote the same policy, but they need not be referred to. It cannot fail to be noticed that this statute does not forbid either natural or artificial persons from entering into written engagements of any description, provided they are not issued to be loaned or put in circulation as money Indeed, the inference is almost irresistible that corporations, whether banking or not, as well as individuals, might, at least in the opinion of the legislature, create evidences of debt which do not fall within the particular class condemned. Such a statute is not, however, the source from which to derive that power. It is simply a prohibitory statute, which appears to assume that the power exists. The particular object of the act, it is well known, was to restrain all unincorporated persons and all corporations which had not' a special authority of law from exercising banking powers.

The most delicate and dangerous by far of all these powers was that of creating a paper currency, to be loaned and put in circulation as money, for the use of the community. While, therefore, all other restraints were removed, by the act of 1837, already cited for another purpose, so far as unincorporated persons are concerned, this particular one was kept in full force precisely as it stood in the act of 1829, binding both upon persons and corporations of every description. It may be useful to add, that the restraining act of 1829 contained nothing new which is material to the present purpose. The policy began in the year 1804, was continued in the acts of 1813, 1818, 1829, down to the year 1837, and even in the statute of that year it was maintained, as we have just seen, so far as the power of creating currency is concerned. It was thus that banking in general became with us a franchise at an early day; but it has never been held, and I think never suggested, that there was anything in the restraining statutes, or in the policy they indicated, to deprive corporations of any kind of the incidental power to contract debts and make their written engagements therefor in any form not coming within the particular condemnation of these statutes. Banking only was restrained, one of the distinct operations of that business being the issuing upon loan of a paper currency; but the incidental power of corporations, whether belonging to that class or not, to become a debtor as well as a creditor, and to create their obligations not intended or calculated to mingle in the currency, never came within the prohibition.

We come then to the general act of 1838, which I am sure can now be intelligibly examined with reference to this question. The restraints upon issuing notes, bills, &c., upon loan or for circulation as money, as we have seen, were still in force; and it is now very pertinent to observe, that this act did not repeal them. They are in full forcu at this day. The statute, however, did authorize the creation of an indefinite number of associated banks, which we call banking corporations, and gave them the issuing power upon the precise conditions therein contained; and it gave the same power to private individuals also, under the same exact conditions. Those conditions required thai the notes intended to be loaned and issued as currency should be payable on demand, should be countersigned and registered in one of the departments of the state government, and should be secured by a pledge of bonds and mortgages and stocks. This, I repeat, was not a repeal of the restraining acts, but it was the “ special authority of law” required by the very language of those acts, in order to exercise the business of banking in the particular department of creating and issuing a paper currency. It is, therefore, beyond all question, true that this power cannot be exercised under the act of 1838, except upon the precise conditions named; and if the trust bonds of the North American Trust and Banking Company were an exercise of that independent banking power, the conclusion would certainly follow that they were unauthorized. They would be ultra vires, because no “ express authority” to issue them can be found in that statute, and expressly prohibited by the restraining act.

But it is just as plain .that this “ special authority of law,’ which conditionally relieved, and which was necessary to relieve, associated banks and private persons from the operation of the restraining laws, was not in any sense a prohibitory, statute. On the contrary, it was plainly an enabling statute. It prohibited, neither expressly nor impliedly, anything previously lawful; but it simply enabled that to be done, under particular conditions, which was before unlawful. The legislature of 1829, and its predecessors since 1804, had declared that no banking powers should be exercised without special authority of law, and that authority was contained in a great number of special bank charters. The legislature of 1837 declared that individuals and associations might exercise those powers without restraint, except the one of creating currency. The legislature of 1838 said to them: “ You shall have that power also, provided you associate in a certain manner if you act as associations; and provided, further, whether you act as individuals or association's, that you procure your circulation and secure its redemption in the manner we have pointed out.”

These views of the act of 1838, and of antecedent legislation, if they are correct, meet with directness and force the argument so much urged by the receiver’s counsel, that out of the express provisions contained in that act, allowing circulating notes of a particular kind to be issued, payable on demand, there arises an implied prohibition against all other written engagements, and especially against all time paper. We are enabled to see distinctly that, without the express authority of law contained in those provisions, neither associations nor individuals could lawfully issue notes for circulation or upon loan, payable on demand. That banking power was sealed up as a franchise by the previous legislation and policy of the state. It was opened only on the performance of the conditions precedent which have been named. To all persons and associations not performing those conditions it remains sealed as before. But it would be absurd to hold that, in thus opening the franchise and laying down those conditions, the legislature intended anything more ; and especially it would be absurd to say that out of such a statute there springs a condemnation of that which was antecedently lawful. How it is tha