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“it is clear that the charter was wantonly violated," and that a base fraud has been perpetrated upon the public by the bank's methods of organization and that it should meet with a "swift and effective correction."
In the support of the second charge, the testimony of one witness is quoted that five of the directors instead of being bona-fide owners of stock previous to the time of election, had been given a $50 share of stock to permit them to make a technical qualification for the position of director, instead of following the spirit of the requirements of the charter, and that this act was an abuse of corporate power and repugnant to the public interest.
“The third and greatest delinquency of the bank” in the words of the committee, was the entire suspension of specie payments, in violation of Sec. 10 of the law of incorporation. That by the violation of this section, the Legislature had the right under Sec. 23 to revoke the charter.
The committee was of the opinion that the Legislature not only had the right to revoke its charter under Sec. 23, but that any subsequent Legislature had the authority to repeal any of the acts of a preceding Legislature, whether the acts of the preceding session have a repealing clause or not. That the Legislature had a right to repeal a law when it became “odious” to the people; and that the abuse of the privileges of the bank in suspending specie payments whereby it was swindling the people out of large sums of money by its depreciated notes made this law “odious” to the people; and therefore, upon this ground, this session of the Legislature had a right to repeal the act of the previous one which constituted it.
The committee indulged in the general opinion that beside the three particular fraudulent evasions of the charter enumerated above, “all the proceedings of the bank in its corporate capacity, subsequently to the forfeiture of its charter by reason of either of the above abuses, have been fraudulent, and that the directors are subject to prosecution accordingly," but, whether this opinion is right or wrong, there could be no question of the forfeiture of the charter; and more especially that there could be no doubt as to the power of the Legislature to annul it.
(6) Minority Report of Select Committee of the House.
On January 24th, the next day, the minority report upon the same bill (No. 23, H. R.) was submitted. This report insisted that by the unconditional repeal of the charter of the Miners' Bank all of the real estate would revert to grantor or his heirs, and the debts due to and from it were extinguished. In proof of this theory, Angel and Ames' Corporations, p. 513, Commercial Bank vs. Lockwood, administrator, Harrington's Reports, Vol. 4, p. 115, and Blackford's Indiana Reports, Vol. I, p. 216, were cited. Therefore, if the bill passed, the entire assets of the bank, amounting to over $60,000, would be lost to the bill-holders and creditors. The minority were opposed to the provisions of the bill vesting the appointment of trustees in the Judge of the Third Judicial District, because by the conditions of the bill the whole of the assets would be ultimately put in the hands of a single individual. They had the “fullest confidence” in the integrity of the Judge, but were opposed to concentrating such vast powers in the hands of any individual, unguarded by any checks against the abuse of that power.
For the reasons stated, the bill was objectionable in nearly all of its provisions.
It was cited from the testimony that the bank suspended specie payments in March, 1841, which was several months after the suspension of the banks in Illinois and elsewhere, the suspension continuing until June, 1842. During the time of the suspension the bank redeemed its notes in current funds "such as the bills of Illinois, Indiana and Kentucky banks"; and after its suspension it had made arrangements with the Land Office, by which its bills were to be received to "some small extent" in the payment for land entered, and to "some
1 Journal of House, p. 164 et seq.
extent" had paid specie to the citizens in exchange for its bills of the denomination of five dollars.
The bank in July, 1842, had made arrangements by which $20,000 had been deposited in the Galena branch of the State Bank of Illinois, but $10,000 of this deposit had been countermanded, and on account of this the bank had been compelled to suspend again. At the time of this suspension there was only $8,000 of its notes in circulation, not controlled by its stockholders. The Territory of Iowa then owed the bank $5,876 and this sum, with the specie in the bank, would have been sufficient to have paid all the bank bills not controlled by the stockholders.
A statement of the condition of the bank at this time had been procured by the minority of the committee from one of the witnesses, Mr. Mobley, who had testified that it was taken from the statement of the Cashier and that he had examined the books of the bank and counted the cash and knew that it was correct. Real Estate owned by Bank...
$16,387.13 Personal property...
1,481.37 Amount due from other banks and individuals on account.
34,649.87 From Iowa Territory.
803.33 Dubuque County...
7,179.50 Specie on Hand.....
Total Amount of Assets.....
$60,730.20 LIABILITIES. Whole amount of notes in circulation as per Cashier's Statement...
.$113,190.00 Of this amount $105,190 is in the hands
of the stockholders, leaving in other hands to be redeemed.
$ 8,190.00 All other immediate liabilities.... 7,897.27
Balance in favor of Bank....
$ 44,649.93 The testimony of the witnesses in regard to the payment of the capital as required by the charter still leaves this question an open one, and as in former cases was simply hearsay. Two of the witnesses, Messrs. Fales and Davis, in reply to the question, “How much stock was actually paid in?” Submitted in writing the answer, “Don't know.” To the question, “How was it paid in?” the same witnesses answered in writrin, “Heard that some paid in money and others gave stock notes.” These questions and answers in the minority report were a partial rebuttal of the statement in the body of the majority report that “the stock subscribed was never paid in any other manner than by the stockholders giving their notes to the institution"; and the testimony of the witnesses submitted in the majority report does not sustain their own statement. In fact, the evidence in regard to the original subscription of the stock was hearsay.
This report shows that St. John bought $40,000 of stock of the bank “owned by men in New York or some of the Eastern cities" of the Cashier; and that these notes became the property of the bank; and that the bank loaned' to him $57,000; that the stock had been recovered by the bank, but that the money loaned him was a total loss. The losses by the stockholders had been a heavy one. The change of the ownership of the stock in June, 1842, had not been detrimental to the bill-holders, as there had been paid out $25,000 in the redemption of bills of the bank, and no bills had been put in circulation. It was generally acknowledged by those most opposed to the bank that "the present directors are men of unimpeachable integrity, in whose honesty and business capacity, the community have the fullest confidence."
(c) Consideration of Reports by the House.
Immediately after the reading of this report the bill was considered in the committee of the whole, several amendments made to it, and then reported back. The question upon the amendments was considered separately. The first section of the bill as offered provided for the revocation of the charter. The amendment offered provided that the act incorporating the Miners' Bank should be null and void as far as the act had granted to the bank “any privileges to loan money, discount paper or do any other banking privilege.” To meet the argument in the minority's report in regard to the reversion of the land and the estoppal of the collecting or payments of debts by the Trustees to be appointed, a special provision was inserted as the concluding clause of this section. This provision was that nothing in the first section of the bill should be construed in such a manner as to prevent the Trustees, provided for by the act, from collecting all debts due to the bank and all claims against it, or from the transaction of the business necessary for the closing up of the affairs of the bank. This amendment was agreed to.
1 On September 2, 1843, judgment by default was rendered against Harry St. John for $42,870.97, Docket B, 3rd Judicial District (Dubuque County), p. 233.
2 Journal of House, p. 167.
An attempt was then made to have the Judge of the Second Judicial District make the appointment of the two Trustees, provided for in the hill, who were to settle up the affairs of the bank.
It was provided that all property of the bank which might be sold by the Trustees should be by "public outcry” after giving thirty days' notice of the sale.
An attempt to regulate, by an additional section, the priority of claims failed. This additional section provided that the necessary expenses of winding up the affairs of the bank should be a pro rata division made on all the legal liabilities of the corporation, but no payment was to be made on the stock until all the other legal liabilities were first paid.
An additional section provided that the present directors should act as Trustees for the stockholders and creditors until those provided for in this act were appointed.
An attempt to pass an amendment, providing that no debtor of the bank should take advantage “by reason of the bank
* Journal of House, p. 171.