R. & W. King vs. Stephen D. Elliott

R. & W. King vs. Stephen D. Elliott. By the charter of the Mississippi Railroad Company, conferring hanking privileges on that company, it was enacted that the subscribers should pay, at the time of subscription, twenty dollars on each share taken, in specie, or in the notes of specie-paying banks; the charter was silent as to how or when the residue of the stock should be paid, but conferred all the usual rights, powers, and privileges of banking which were exercised by other banks in this state : held, that the residue of the capital stock Was payable by the stockholders in specie only. The payment of the capital stock in specie is an essential requisite to the existence of a bank. The capital stock of a bank is a trust fund for the payment of the note holders, and creditors of the bank. The acts of the legislature of 1840 and 1S42, which provide for the payment of the debts due to the banks of this state by the debtors, even when garnisheed, in the notes of such banks, do^not apply to the indebtedness of delinquent stockholders, for stock unpaid irnguch indebtedness can only be discharged in specie, whether to the banks or to a garnishee. The indebtedness of a delinquent stockholder of a bank for stock not paid in, is subject to be garnisheed at last by the judgment creditors of such bank; and such stockholder, when so garnisheed, cannot discharge his debt for stock, with the notes of the bank, but must pay it in specie. It. being a judgment creditor of a bank in this state, garnisheed, under the statute of 1827, E. as a debtor to the bank ; E. answered that he owed the bank eleven hundred dollars on his original subscription as a stockholder, and tendered that sum in the notes of the bank, in discharge of the garnishment; held, that the notes of the bank were no discharge of the garnishment; and it not appearing that the capital stock was not an ample indemnity for all the creditors, nor that E. was a creditor when he was garnisheed ; held, that K. was entitled to a judgment against E. in the ordinary form for the amount of stock due by him. In error, from the circuit court of Adams county; the Hon. C. C. Cage presiding. Ralph and William King obtained judgment at the May term, 1841, of the circuit court of Adams county, for the sum of $7832 50, against the Mississippi Railroad Company; and on the third day of April, 1841, made oath that the defendants had no visible property in their possession upon which a levy could be made to satisfy the judgment; and they suggested the names-of various persons as indebted-to the defendants, among the rest that of Stephen D. Elliott, and prayed for process of garnishment against them. A writ of garnishment accordingly issued, and was served on Elliott, who appeared at the November term, 1841, and answered that the Mississsippi Railroad Company was a bank incorporated by the legislature of the state of Mississippi ; that he was one of the subscribers to the stock of the company, and on that subscription he owed the company for instalments and interest, on the 22d of November instant, the-sum of $1160 88; that he was advised and believed that he was entitled to pay the same, and he then claimed to pay the same in the bank notes of the company; which notes he produced and filed with his answer as a part of it, sufficient in-amount to liquidate and pay off the sum due by him for stock, which constituted all his indebtedness. This answer was under oath. Exceptions were filed to it by the plaintiffs, on the ground that Elliott was not entitled to pay his indebtedness in the notes of the company. At a subsequent term of the court the exceptions were overruled, the answer sustained, and the garnishee discharged. From which judgment of the court this writ of error was prosecuted. The error assigned, is in not sustaining the exceptions to the answer, and giving judgment thereon for the plaintiffs. Montgomery and Boyd, for defendants in error. The statute relied on by the defendant was passed January session, 1840; see acts of 1840, pp. 21 and 22. The language of the act is, that all “banks in this state shall, at all times, receive their respective notes at par, in the liquidation of their bills receivable, and other claims due them.” Under this statute, and indeed without it, we concede the right to the defendant to pay the debt he owed to the railroad company, previous to the garnishment, in the notes of the bank ; but we contend that, notwithstanding the statute, the garnishment operated as a transfer of the debt to the plaintiffs, who-,. being private individuals, are entitled to receive the amount in money. At the time the garnishment was served, there is no doubt the attachment or garnishment law operated as a transfer of the debt, so as to entitle the garnishing creditors to collect it, and to make it unlawful to pay the amount to the original creditor; in other words, a payment to the original creditor would not be a satisfaction of the debt so as to defeat the right of the garnish-eing creditor. If the defence set up in this case prevails, that rule will be defeated; for his procuring the notes of the original creditor, after he is garnisheed, cannot operate more strongly in his favor than procuring a receipt in full from such creditor. And this case, to be rightly understood, must be considered substantially in the light of a payment in full by a garnishee, after summons, to his original creditor, which effectually defeats the beneficial design of the attachment law. Serg. on Att. 108; McBride v. Floyd, 2 Bail. R. 209 ; Taylor v. Gardner, 2 Wash. C. C. Rep. 488; Barker v. Farrar, 2 Brown R. 332; Fitzgerald v. Caldwer, 2 Dali. 215; Myers v. Rich, 1 Binney, 26. The case cited in Wash. C. C. R. was much stronger in favor of the garnishee than the present, for he only paid the bills of exchange to which he was a party before service, of garnishment ; yet the court ruled that he was, nevertheless, liable to the attaching creditor for the. amount of the funds in his hands at the date of the service. The statute which is relied on is limited in its operation to payments to the bank. When the bank ceases to be the creditor, in any legal manner, of course the statute ceases to operate on the debt. The language of the statute does not confer on the debtors of the bank the right to pay their debts, originally due to the banks, in their notes, (which would be a legal condition annexed to the indebtedness,) but only gives that right when the bank is the legal recipient of the debt. It is a duty imposed on the bank, and not a right conferred on the debtor. The second ground relied on by the defendant is, that since the summons in garnishment, but before the trial on the exceptions to the answer, another act of the legislature was passed, expressly providing that garnishees who were indebted to banks should have the right to pay the amount of their debts in the notes of the bank, notwithstanding the garnishment. See Acts, 1842, p. 140. We take the broad ground that this statute is unconstitutional, if it bears the construction contended for by defendants. 1. Because it is in conflict with that clause of the constitution which prohibits the states from making anything but gold and silver coin a lawful tender in payment of debts. It will be contended that this act is part of, or only affects the remedy, and that it is competent for the legislature to take away the remedy by garnishment altogether, and, consequently may modify that remedy at pleasure. We admit the postulate, but deny the conclusion. There is no doubt the legislature may, at pleasure, take away the remedy by the attachment, or garnishment; but while that remedy remains, the creditors of a bank, as T^gll as an individual, are entitled to it, and when the gar-nisl^ng creditor has recovered a judgment against the garnishee, he is entitled to be paid in money; and it is not competent for the legislature to prescribe that he shall receive anything else. . If this statute can be sustained, the condition of plaintiffs or creditors would not be advanced or benefited in the least. To use a very significant phrase of Davy Crockett, “ the plaintiff would come out at the same hole- he went in.” If anything, his condition would be worse; for if he was a judgment creditor, as is the case here, he might, by this new mode of satisfaction, be converted into a simple contract creditor, at considerable expense. The second section of this act provides, in substance, that, in proceedings against debtors to banks by garnishment, the judg-, ment shall be given, payable in the issues of the bank. We are aware that this section is susceptible of two constructions. We contend the fairest construction is, that this section gives the right to those who become debtors to bank by being garnisheed, to pay such debt to the bank in such issues of the bank. The third section is susceptible of a similar construction; it provides that persons summoned as garnishees of any bank may, before or after judgment, tender .the issues of the bank in payment. The term, garnishees of a bank, cannot fairly be considered as meaning debtors of a bank who are garnisheed, but must mean persons who are garnisheed by a bank. This construction is consistent with justice, and does no violence to the language used by the legislature. But we have considered this act as entitled to the construction contended for on the other side, as will presently be seen. The second section of the act provides, that judgment shall be rendered against debtors of banks by garnishment, to be discharged in the issues of the banks. In times when sober reason prevails in legislation, a court, in giving construction to such a sentence as this, would, out of respect for the intelligence of the legislature, be bound to presume the book is misprinted; for we cannot impute to the legislature such an absurdity. We must, upon well settled principles of construction, concede that they knew the existing laws on the subject, and that, by the/act under consideration, they intended to remedy some defect ‘by the alteration. Now take all the statutes together, and how do we find the easel This being a garnishment after judgment, we will only refer to so much of the previous legislation as applies to the case. The act of 1827 provides, in substance, that when the defendant of a judgment has no property subject to execution, but has debts due to him, the plaintiff may garnishee such debtors and collect the debts, or so much as will satisfy his judgment. This act is wise, salutary, and just. Its object is apparent, the necessity for its adoption is obvious, and its operation rational and judicious. But add the modification supposed to be intended by the act of 1842, and what is the result, as far as bank creditors are concerned 1 In substance, this statute provides that the judgment against the garnishee, so far from paying the plaintiff his judgment, or any part of it, shall only be bound to give the plaintiff another cause of action against the original defendant. Now is the plaintiff, by this last statute, deprived of his remedy by garnishment 1 It is not pretended. , If he is entitled to judgment, can the legislature pfé-scribe that such judgment may be discharged in anything but money! Unquestionably not. The moment you admit that the plaintiffs are entitled to judgment, you must concede that he is a creditor, and his debt can only be paid in constitutional money. 'The third section of the act is liable to the same objections, and also to some objections peculiar to its own phraseology. This section provides that the garnishees of a bank, may, before judgment or after, tender, in payment of such judgment or demand, the amount thereof in the issues of the bank. The language of this section is noj/fe from ambiguity. It is quite difficult to determine what is meant; but if, from the context and subject-matter of the act, we may with fairness construe it to mean, that the debtor of a bank, who is garhisheed, may tender to the plaintiff, in the garnishment, the /amount he owqs to the bank in the issues of the bank, either before or aftár judgment against him as garnishee, it merely carries out the object of the second section, and is more clearly in conflict with the constitution ; for it enables the garnishee not only to tender the debt to the bank in its issues, but to tender the same to the creditor of the bank in satisfaction of his claim against the bank. If it is lawful to make the tender, it is, of course, the duty of the creditor to receive it. Now is it not ridiculous to suppose that a judgment creditor of a bank can, by operation of tender laws, be converted into a simple contract creditor 1 In other words, that a judgment creditor may, without his consent, be paid the amount of his judgment in the notes of his debtor. If we could understand this section to mean, that the garnishee might tender to the bank, to whom he was indebted, the amount in its issue, there might be some argument in favor of its constitutionality, for that would only be extending the right of set-off; but to give the statute that construction, would involve us in absurdity. Why would the legislature give us the right of garnisheeing, if, at the same time, it extended to the garnishee the right to liquidate the demand with his creditor, not only after summons, but after judgment 1 It is said the law never does a vain or foolish thing; yet this would appear vain and foolish, if the principles contended for by defendant’s counsel are sustained. Again, it appears the defendant is a stockholder, and indebted for a balance due on his subscription for stock. The charter required the payment by stockholders to be made in money, or secured by mortgage. See Acts of 1836, pp. 174, 175. Now, in substance, the stockholders are the bank, and the notes of the bank are the notes of the stockholders, and the stockholders are liable for the payment of the debts of the bank to the extent of their stock; atld if such stock be not paid for, they can be rendered personally liable to the creditors of the bank for the amount due by them for stock, by a proceeding in chancery. And shall it be said that any law is constitutional, which enables a debtor to pay his creditor the amount due on a judgment, by giving his promissory note; and that against the consent of the creditor? And what ground of equity does the defendant present, to justify a liberal construction of the statutes, so as to bring him within their protection ? The plaintiffs must be presumed to have given credit to the Railroad Company, on the faith of the subscriptions for stock ; and the failure, on the part of the defendants and others, to pay their subscriptions, caused the failure, on the part of the company, to pay the plaintiff and others the demands due them. Thus the fraud and injustice of the defendant has aided in making the issues of the company of less value than money. And shall he be allowed to take advantage of his own wrong to make a profit out of the credulous creditor, who trusted to his solemn promises to provide the funds to meet their demands ? It cannot be presumed the legislature intended to include, or did include, this class of debtors in either of the statutes before referred to. To test the question, let us notice the practical operation of the rule. The stockholders are the principals, the directors are their agents. The latter have the right to issue what amount of notes they please, and the stock list is held out as a security for the payment of the debts; but when the debts become due, and the funds are required, the stockholders claim the right of paying in the issues of the hank, which can be by their agents increased to such an amount, as will render them of no value whatever. We contend for the letter of the charter, which requires payment in money, and insists that no subsequent legislation can alter or take away that right. See Acts, 1836, p. 175. See. Payne et al. v. Baldwin et al. 3 S. &M. 661. See, also, Amendments to Charter, Col. of Statutes, 702, 830. If the legislature cannot take away the rights of a corporator, it certainly cannot relieve him from his duties. One of his duties is to pay for his stock when demanded; for the failure to perform which, an action is given, or the president and directors may declare the stock forfeited. Acts, 1836, p. 175, 176, sec. 4; Ibid. 1837; Ibid. 1838. Again, the stock of a bank is a “ pledge or trust fund ” for the payment of the debts of the bank; and if the corporators should, by agreement, divide out the property of the corporation, without providing the means of paying debts, a court of chancery would compel a contribution in favor of creditors. Angelí & Ames on Corp. 355-357; 3 Mason R. 308. If courts will go such lengths in favor of creditors of a corporation which is dissolved, is it not reasonable to expect them to go the length required in this case, of compelling the stockholders to pay the purchase-money due for their stock, in a corporation still in existence, and exercising all the privileges conferred on it! • A stockholder is not a debtor of the bank contemplated in the act. No action could be maintained by the bank to compel payment for his stock, without an express agreement or a provision to that effect in the charter. Ang. & Ames,. 299, 302, 303. Quitman and McMurran, for defendants in error. The question in this case, is whether Elliott is entitled to pay as a garnishee, in this case in the notes of the Mississippi Railroad Company. The plaintiffs, as judgment creditors of that company, garnisheed the defendant, as a debtor of the company, under the act of 1827; he appeared, answered, and in his answer tendered the notes of the company. This garnishment law, originating with the act of 1827, extends an additional remedy to the judgment creditor, by sub-rogating him to the rights of the judgment debtor as to the liability of the person garnisheed; and it does nothing more nor less. The garnishee is to deliver effects, or account for indebtedness, precisely as he would, in law, to the judgment debtor. Now the second section of the act of 1840, pp. 21, 22, in force before the plaintiff’s judgment against the company, and before the garnishment in this case, provides, that the banks in this state shall at all times receive their notes at par in liquidation of their claims. This railroad company is a bank, as appears by the answer, and the amended charter in the statute book. And there can be no doubt of the power of the legislature to compel both banks and individuals to receive their own notes in payment of their own claims. It is nothing more than the ordinary exercise of legislative power upon the subject of offsets. And therefore, as the company would be compelled to ■ receive their own notes from Elliott, in payment of a demand against him, so as R. and W. King are placed in the stead of the company, they are entitled to no other funds from Elliott, if tendered by him. If Elliott had agreed in writing to pay the company $1000, expressly in the notes of the company, could the plaintiffs, by garnisheeing him, change such contract, and require payment in specie? Surely not. And the law of 1840, referred to, gives Elliott the right, as fully as if the provision were incorporated into the contract creating Elliott’s indebtedness. Another ground, equally decisive. By the act of the legislature of 1842, (chap. 27, p. 140,) all debtors of banks may, before or after judgment, in the proceedings in garnishment' against such debtors, tender, in satisfaction of the debt, the issues of the bank. In this case it has been done before judgment. It was contended, in the court below, that this law was unconstitutional, inasmuch as it authorizes a tender otherwise than in gold and silver. Such an argument has no application to this case, as Elliott tenders the money or notes before judgment ; and in our opinion it would be the same, too, if tendered after judgment. If we contract to pay a man in specie, his own note, held by us, is a legal offset. The whole question resolves itself into the principle for which we contend, that this garnishment proceeding is entirely of a remedial nature, not impairing or touching on contracts between parties, as there is no priority of contract between the plaintiffs and Elliott, ánd subject to any modifications which the legislature may enact. That body could introduce any change, or repeal the entire act of 1827, and thereby end, in transitu, all proceedings then pending in court, under that act. We admit that a law authorizing a man to pay the specie debts he owes to another in anything but specie, or the liabilities of that other, would be unconstitutional; but when the legislature extends to the judgment creditor a peculiar remedy, to reach the credits of his debtor in the hands of a third person, it can be done legally and constitutionally just in any shape and to any extent the legislature may choose. For it regards the remedy, and not the right of the party, and there can be' no vested right in a remedy. Let us advert to a few analogous cases, according to our view of them. Thus, in the case of Mason v. Haile, 12 Wheat. R. 370-378, it ^decided that a bail-bond, executed and in force, is rendered nugatory, and the bail exonerated by a law abolishing imprisonment for debt after the execution of the bond. And for the obvious reason given by the court, that “ it acts merely on the remedy, and that in part only.” So, in the case before the court, the law of 1842 acts only in part on the remedy furnished by the law of 1827; the notes of the Banking Company may be. worth ninety-nine cents, or only five cents on the dollar. Whatever it may be, it furnishes the judgment creditor assets of the debtor, through the garnishee, to that extent. The law does not provide that the plaintiffs shall take these notes at par value, or that they shall extinguish dollar for dollar of plaintiff’s debt. As to the disposition of the notes lodged in court, with the garnishee’s answer, the matter is not now presented; but we doubt not that the issues of the company surrendered would be sold under an order of the court, or by the sheriff, without such an order. Rev. Code, 164, sect. 18. The following cases, too, we deem strictly analogous in principle : Bank of Maryland v. Ruff et al. 7 Gill & John. 488; Milter's case, 1 W. Bl. 451; 4 Lea tes R. 392 ; Bacon v. Cal-lender, 6 Mass. R1 303 - 309 ; Springfield v. Hampden Corners. 6 Pick. R. 501-.503. These cases show that the repeal of an act under which proceedings are- pending in court, arrests those proceedings, and terminates them, and that the court can proceed no further therein. How much more clear the power to modify the proceeding as it progressed, subsequently. As to the power of the legislature, in passing the laws.of 1840 and 1842, cited by us, we also invoke in its favor the principle decided by this court, in the cases of Payne et al. v. Baldwin et al., and the Planters Bank v. Sharpe. But the decision of this court, in the case of Riggs v. Dyche et al. 2 S. & M. 606, is in point. But it may be urged that as Elliott is indebted upon his subscription for stock to the company, a different rule applies, and that he is compelled to pay in specie. The statutes make no such distinction, and warrant no such construction. That of 1840 embraces all claims due the Banking Company; and the act of 1842 covers all proceedings against those who may be debtors to banks in this state, in garnishment, &c. Now Elliott is either a debtor to the company, or not; if he is, he is entitled to the provisions of the law, like other debtors; and if he is not a debtor he is not liable in garnishment, and must be discharged on that ground. We conceive that the question to be decided by the court, whether he is liable for instalments due as a stockholder, in this proceeding, at all, is a much more serious one than the question as to the funds he may tender in discharge of that liability. Again, the answer of Elliott shows, as far as any date appears, that his liability arose for instalments at the time he put in his answer, subsequent to the act of 1840. Besides, in the original charter of this Railroad Company, specie is not required to be paid by the subscriber of stock. Statute Laws of 1836, p. 173 -175, &c. sec. 3. So, the supplemental charter, constituting the company a bank, passed May 12, 1837, authorizing an additional subscription of stock, requires the cash payment of twenty dollars a share, at the time of subscribing, to be paid in specie. But it makes no provision as to the funds in which the further instalments shall be paid. But, suppose it required all the instalments to be paid in specie, it could make no difference in law. The man who borrows money of a' bank, or purchases her property, is as much bound, under the constitution and laws, to pay in specie, as the man who subscribes for stock. At law, each is sued as the common debtor of the bank, the remedy against each is the same, and the result would be the same; offsets would be as available with the one as the other. In a case of fraud, established against a stockholder in a court of equity, that court might adopt a different rule, possibly, in determining the extent of his liability. But this proceeding is in the common law courts, and no fraud is pretended. See Angelí and Ames on Corporations, 353, that corporators can only be pursued in equity. If, as contended by the opposite counsel, this is a purely equitable proceeding, then this court has no jurisdiction, or rather the circuit court of Adams county has not, as the amount in controversy exceeds five hundred dollars ; and, in this view of the case, the judgment of the court below was correct. S. S. Boyd, in reply. That the legislature cannot, after an acceptance of the charter by the stockholders, deprive the corporators of any of their rights, powers or privileges of a corporate character, without their consent. 2. That the stockholders, after their acceptance, cannot vary their contract as shown in their act of incorporation, without the consent of the state. 3. As a corollary, that, after such acceptance, and the rights of third parties have become involved, neither the state nor the stockholders can, jointly or severally, alter or vary any of the terms of the charter, so as to affect the interest of such third parties. 4. That, under like circumstances, much less can the mere agents of the stockholders, to wit, the president and directors, release the stockholders from their charter obligations. 5. That, the great difference between the stock debt and the other debts is, that the stpck debt is the debt of the charter, and all the other debts are contracted with the corporate agents; the stoelc debt precedes the appointment of those agents, and they get their authority to sue for it, either from the further grant in the charter, or a subsequent promise directly to them. 6. Hence, a stock debtor can no more discharge his stock debt, by the notes of his own bank, to the prejudice of creditors, than any other debtor can discharge one of his debts with another debt of equal obligation. The stockholder owes the _ stock, and he owes the issues of the bank, and he cannot pay one with the other ; but the ordinary debtor owes only his own obligation to the bank, and can, of course, discharge it with any obligation of the bank, of equal amount. He certainly cannot, discharge it with another obligation of his own. 7. As to the objection of want of parties, and insufficiency of remedy, &c. First. The remedy by garnishment applies, whenever the debtor of a debtor owes, or has effects. Tt is a short bill of discovery, and on answer, a decree is made. This is, therefore, an appropriate remedy, where there are not many parties interested, and even then, there is no limit in the statute. But in these cases, it does not appear to the court that there is another creditor of the company in existence, nor is it shown that there is another debtor who has not paid up. Hence it is but inference, and not warranted by the record, that other parties and interests ought to be before the court. This cannot be shown .by way of argument, but ought to have been by plea. The defendant, having answered, cannot travel out of his answer, or rely oh any technical ground. The other points of our argument upon the statute, it is supposed have been sufficiently stated by the court. That our right, whatever it was, which attached before the passage of the act of 1842, cannot be affected by the act, is too clear for argument. That no tender to the Bank (or Railroad Company) after our right accrued, would affect it, seems also clear. Much less could a tender to the judgment creditor, have any such effect, at any time. (See Western Law Journal, for February, 1845.) , So much for the right. .The remedy would appear equally clear. There is nothing before the court, to show that there is any other debtor or creditor, except those named in the pleadings. The garnishment itself is, in terms, a short bill of discovery, and intended to apply to the case where the .creditor can find a debtor of his debtor, with money or effects. It was for want of this very remedy that the cases in Massachusetts were turned out of court. For they had no appropriate remedy at law, like our garnishment, and!* they had no chancery jurisdiction. Judge Jackson, in giving his decision in the cases in 15 or 16 Massachusetts Reports, laments the want of a proper remedy. This has been cured by our statutes, giving to the individual creditor the benefit of following his separate interests, by the garnishment, or else to join all other creditors or debtors in a chancery proceeding, to settle all the claims in one suit. Where he does not wish to wind up the affairs of a bank, or cannot even show a case to warrant it, he can still proceed alone to collect his own debt, without regard to others. What judgment could be rendered against such banks as have no circulation, such as the Natchez and Manchester Commercial Banks? Can a stockholder pay his debts to a bank, with his stock, before creditors are paid? Can he even hold a dividend as against them ? Can the stock be divided out, or, which is the same thing, be paid in at a profit, to the prejudice of creditors? If paid in depreciated paper, does not a stockholder receive a dividend, or division on his stock, equal to the difference.between his payment and gold and silver? And has it not been again and again decided, that any premature division of stock or dividends, can be followed by a creditor ? Is not the stockholder the last, and not the first, to receive his share out of the trust fund? Are not creditors the first entitled to their share? How could the railroad in question, which was the object of the charter, (the bank being but a subsequent incident,) be built, if no stock was paid in, or if only paid in the promissory notes of stockholders, or the issues of the bank, which were, in effect, the notes of the stockholders? If the payment of stock can be made in the issues, does it not necessarily follow, that a stockholder who has paid up his stock, and yet owes notes to the bank, on an ordinary discount, could enjoin the collection of the notes till his stock is paid, or compel it to be received in payment of his note. [MAJORITY — Mr. Chief Justice Shahkey] Mr. Chief Justice Shahkey delivered the opinion of the court. The plaintiffs in error had recovered a judgment against the Mississippi Railroad Company, for $7832, a®d, failing to realize the amount by the process of execution, they resorted to the statutory remedy of garnishee process against the debtors of the bank. The9affidavit required by the statute was filed, and at the same time it was suggested, in writing, that Elliott and sundry other persons, were indebted to the bank. The garnishee process issued, and Elliott alone answered, in substance as follows, to wit: That the Mississippi Railroad Company was a bank incorporated by the legislature; that he was one of the subscribers for the capital stock, and on his subscription was indebted to the bank in the sum of $1160, which amount he was entitled to pay, as he was advised, in the notes or issues of the bank, and accordingly filed with his answer notes to the amount of his indebtedness. To this answer the plaintiffs excepted, and insisted that Elliott was not entitled to pay his debt in the issues of the bank,- and therefore prayed judgment against him; but the court gave judgment for Elliott, and this is now assigned as error. The answer and the exception to it, seem to narrow the ground of controversy down to a single point, to wit: had Elliott a right to pay the bank a balance due for stock in the notes of the bank 1 This, as we conceive, depends upon the character of the indebtedness; or, in other words, it depends on the character of‘the fund, of which that debt constituted a part. In connection with this inquiry, the several laws under which this privilege is claimed, are deserving of seme notice. The first act is that'of 1840, which declares “ that all banks in this state, shall, at all times, receive their respective notes at par, in the liquidation of their bills receivable, and other claims due them.7’ Acts of 1840, 21.* The next is that of 1842, the second section of which declares “that in all proceedings against those who may be debtors to banks in this state, by garnishment, the final judgment shall 'be only given against them, to be discharged in the issues of the bankand the third section provides “ that any person who may be summoned as garnishee of any bank in this state, may, either before or after judgment, tender, in payment and satisfaction of such demand or judgment, the amount thereof in the issues of the bank.” Acts of .1842, 140. The object of these laws, taken together, is plain enough. . As the banks had put large quantities of notes in circulation, which' had become depreciated, it was but justice to require that these notes should be taken in as they had been put out, at par, instead of allowing the banks to exact gold'and silver. Under, the practical operation of the first act it was doubtless thought that it was not calculated to-meet all contingencies. The creditors of the banks had a remedy against bank debtors by garnishment, which operated to transfer the debt from the bank to its creditor; and as it was. then not a debt payable to the bank, it-was supposed to be like all other debts, payable in gold and silver. Hence, with the-laudable design of placing bank debtors, who might be garnisheed, on as good a footing as others, the second section of the act of 1842 was introduced. And as the banks might also garnishee the debtors of their debtors, and thus obtain a transfer of the indebtedness, the third section places such debtors in a like condition with those who were indebted to the banks by direct contract. ' One of the great objects of these acts, was to compel the banks to redeem their circulation under all circumstances. The answer of the defendant was based upon the provision in the act of 1S40, and is sustained, as it is said, by the second section of the act of 1842. An argument has been addressed to us on the constitutionality of this section, if it is to be understood as conferring the right claimed. On its constitutionality in its general application to bank debtors, we do not conceive that we are called on to pass. It will be sufficient for our present purpose if we succeed in showing that it cannot be available to those who may be indebted for a part of the capital stock. This company was chartered in the year 1836, for the purpose of constructing a railroad. It had not, originally, the privilege of banking, but derived such power from a supple-mentál act, passed on the 12th of May, 1837. The provisions of the original charter are therefore of little, consequence in this controversy, as we are now considering it as a bank. The ninth section of the supplemental act provided that books should be opened at different places for the subscription of certain definite amounts of bank stock, in .addition to which,-all the stock that had been “ subscribed, taken, and paid for under the original charter, was converted into bank stock. The subscribers under the bank charter, were required to pay at the time of subscribing, twenty dollars on each share taken, in specie, or in the notes of specie-paying banks.” The charter is silent as to how or when the balance shall be paid, but as the first section conferred all the usual rights, powers, and privileges of banking, which were exercised by other banks in the state, it may be assumed that the balance of the stock was to be paid at such times as the directors might see proper to call it in, which is thp usual regulation, as regards other' banks. The stock in other banks, too, is required to be paid in specie, a regulation which would apply to this bank, by the general provision conferring on it like privileges with other banks in the state, even if the charter had been entirely silent as to the mode of payment. But by requiring that the first instalment should be paid in specie, it necessarily followed that all other instal-ments should be paid in the same way, in the absence of a special provision directing otherwise. Indeed, the payment of the capital stock in specie, is an essential requisite to the existence of a bank. This capital stock constitutes the basis of the circulation, and accordingly we find, by the fifth section, that the bank was restricted in its issues to twice the amount of capital stock actually paid in. We regard it, then, as an indisputable position, resulting both from the general and special provisions in the charter, that subscribers were bound to pay for their stock in specie, or that which was immediately convertible. To what purpose and destiny is the capital stock appropriated, when it is so paid in? By the charter the legislature authorized the bank to issue notes for general circulation. The grant of such a power would have been an imposition on the public, and beyond the scope of legitimate legislative authority, but for the precaution observed in making a suitable provision that a fund should be deposited and set apart for the payment of these notes. Whilst the legislature conferred this privilege on the bank as a source of profit, justice required that the public should have some assurance that the notes were issued on a solid foundation — on an actual capital in deposit, or provided for their redemption. That assurance is given by requiring that the capital stock shall be paid in specie. It is generally true that directors are allowed to call in the capital stock by instalments, to suit the exigencies of the bank, which is an authority given on the presumption that it will be exercised with due fidelity. It is also true that banks are usually permitted to issue notes to an amount exceeding the amount of capital stock. This is supposed to be justified by the laws which regulate a circulating medium, which are thought to justify a presumption that a.sufficient amount will always be employed in the trade of the country to enable the bank to meet the actual calls upon it, and that the whole circulation will be ultimately redeemed by the profits. The public, then, are supposed to have ample indemnity; but to charter a bank, and authorize it to issue notes, without an actual capital, would be the worst form of legal fiction. The object, then, in requiring that a money fund should be provided, is apparent, and it fixes beyond controversy the character of that fund. Being provided and set apart by law for the payment of the notes, the moment the notes are put in circulation, it becomes a trust fund for the benefit of the note-holders. The notes circulate on the faith of that pledge, and on that alone. It was said by Chief Justice Parker, in the case of Spear v. Grant, 16 Mass. R. 9, that, by force of the act of incorporation, the stock was a pledged fund for the payment of all the debts of the institution. And he added, that if any of it should be withdrawn before the debts were paid, there would seem to arise an equitable obligation on the part of the stockholders, to account for so much as they originally consented to subscribe. In the case of Wood v. Dummer, 3 Mason’s R. 308, a bill was filed on the chancery side of the circuit court for the district of Maine, by a creditor, or note-holder, after the dissolution of the corporation, against a stockholder who had withdrawn a portion of his capital stock, on a distribution made by the directors. The language of Judge Story, in deciding the case, is so forcible and appropriate as to justify a quotation at some length.' “ It appears to me,” said the great jurist, “very clear, upon general principles, as well as the legislative intention, that the capital stock of banks is to be deemed a pledge or trust fund for the payment of the debts contracted by the bank. The public, as well as the legislature, have always supposed 'this to be a fund appropriated for such purpose. The individual stockholders are not liable for the debts of the bank in their private capacities. The charter relieves them from personal responsibility, and substitutes the capital stock in its stead. Credit is universally given to this fund by the public, as the only means of payment. During the existence of the corporation, it is the sole property of the corporation, and can be applied only according to its charter, that is, as a fund for the payment of its debts, upon the security of which it maydiscount and circulate notes. Why, otherwise, is any capital stock required by our charters'? If the stock may, the next day after it is paid in, be withdrawn by the stockholders, without payment of the debts of the corporation, why is the amount so studiously provided for? and its payment by the stockholders so diligently required ? To me this point appears so plain upon principles of law, as well as common sense, that I cannot be brought into any doubt that the charter of our banks make the capital stock a trust fund for the payment of all the debts of the corporation. The bill-holders and other creditors have the first claims upon it; and the stockholders have no rights until all the other creditors are satisfied. They have the full benefit of all the profits made by the establishment, and cannot take any portion of the fund, until all .the other claims on it are extinguished. Their rights are not to the capital stock, but to the residuum, after all demands are paid. On a disposition of the corporation, the bill-holders and the stockholders have each equitable claims; but those of the bill-holders possess, as I conceive, a prior exclusive equity.” On the ground of this pledge, this beneficial interest vesting in the note-holder, he decreed that the holder of that fund, although distributed to him on a dissolution of the corporation, should pay to the creditor in proportion to the amount he had withdrawn. The same doctrine was announced by Chancellor Buckner in Robins v. Embry, 1 S. & M. Chan. R. 207, and in Wright v. Petrie, Ibid. 282. These cases decide that the directors are the trustees for creditors and stockholders, and cannot divert the trust fund from the purposes of its destination ; and also that the equities of creditors will attach to the assets of the bank, even in the hands of an assignee. The condition of a stockholder who has not paid the whole amount subscribed by him to the capital stock, is not materially different from the condition of one who has withdrawn a part after páyrnent. Iii-éither case it is the holding of a pledged fund, and the liability is the same. 'By subscribing the engagement to pay became complete. It was an engagement to appropriate under the charter, a certain amount to a certain specific use, and the appropriation is to be considered as made. The charter attached the pledge to that amount in the hands of the subscriber. If, then, the capital stock be a trust fund, sacredly devoted, by the charter to a particular purpose, on the faith of which the notes put in circulation have been received, and by virtue of such reception a beneficial interest has been acquired by each note-holder, can that fund be withdrawn from the purposes of its destination 1 Or can a worthless substitute be created, or can it be converted into a mere fiction, by legislative act, or otherwise 1 Surely not. The note-holders credited that fund alone. The contract entitles them to nothing else. By receiving the notes they became parties in interest to the trust. They are the beneficiaries, the directors are but trustees, and their'interest cannot be defeated, save by the inadequacy of the fund, or by its mismanagement, which are risks they must encounter. There is no difference between a trust created by law, and one created by contract. It is quite as competent to take from the cestui que trust every form of remedy, as it is to deprive him of the fund on which the remedy is to operate. If the legislature, after having provided and pledged this fund, and rights have been acquired to it, can authorize it to be paid in depreciated paper, its total withdrawal, or any other disposition of it, can also be authorized. On this principle a bank may be chartered at one session, and at the next session, after its notes have been put in circulation, and received on the faith of the charter, authority may be given to pay for the stock in a thing different from that originally provided, or indeed such payments may be dispensed with entirely, which would be virtually the .case if authority be given to pay for the stock in the notes of the bank. This bank was chartered in 1837, and probably went immediately into operation. .The plaintiff commenced this proceeding on the 3d of September, 1841, on a judgment which had been rendered before that timjnof course, and on the day following the garnishment was mm upon the defendant in error. If these laws, then, authorize the payment of the notes of the bank for debts due for stock, they of course destroy the interest of the plaintiffs which was previously acquired. Perhaps it would be sufficient to rest this case on legislative intention alone, though it would seem to require a disregard of the langijjrge used to enable us to do so. The act of 1840, declares th^tt the banks shall at all times receive their own notes “at par, in the liquidation of their bills receivable, and other claims due them.” It does not appear whether Elliott’s indebtedness was evidenced by a note or not, though it certainly was a “ claim.” The objects of the laws must have been twofold ; first, to compel the banks to withdraw the notes they had put in circulation; and, secondly, to enable those who had borrowed the notes of the bank to pay back in what they had received. But in the accomplishment of these objects, it is not to be supposed that the legislature intended to prejudice the rights of those who had received the notes in the course of their circulation, by depreciating their value. No plan could be well devised which would more certainly depreciate bank notes, than to destroy the capital of the bank. And what, is also singular, the act of 1840, which required them to take their own notes in payment, is but a supplement to an act passed the day before, entitled “an act requiring the several banks in this state to pay specie.” It is strange that an act with such a title should withhold from them the means of doing that which it required them to do. If the stockholders were exonerated from paying specie, how was the bank to comply with the requisitions of the act ? A supplement is generally designed to aid an original act, and not to defeat it. It is evident that the legislative mind rested mainly on the notes and bills due the banks for discounts. The comprehensive words “ and other claims,” were doubtless inserted to cover any possible omission with regard to the main subject, without any exact admeasurement of their extent. But even if this view should be correct, still, according to the first position, Elliott is not entitled to pay the balance due for stock, in the notes of the bank. We forbear any remarks as to the appropriateness of the remedy pursued- It has not been questioned by the answer, nor in the court below, even if it be questionable. Nor are we called on to protect the rights of other parties. The trust fund may be ample for the indemnity of all creditors, for anything • that appears in this record. Elliott, by being a note-holder, is also a creditor, but he is not in a situation to assert his claim, to the prejudice of the plaintiffs. He does not state in his answer that he held these notes when he was garnisheed, and as the claim was then transferred by law, no offset subsequently acquired, could avail him. He has put himself exclusively on his right to pay the plaintiffs in the notes of the bank. The plaintiffs, besides having a general right in all the trust fund, have located it by the garnishment on so much as may be found in the defendant’s hands. The defendant, at the time of the garnishment, had no claim to interpose against the plaintiff’s right. If he has subsequently acquired any, he stands only in the condition of other general creditors. At least, he has urged no special circumstances to entitle him to withhold the amount in his hands. The judgment must therefore be reversed, and judgment entered on the answer for the plaintiffs.