President and Directors of the Bank of the Commonwealth of Kentucky v. Wister

ERROR to the circuit court of the district of Kentucky.

On the 31st October 1824, the agent of the defendants in error, John T. Drake, deposited in the bank of the commonwealth of Kentucky, in the notes of that bank, the sum of $7730.81, and received from the cashier the following memorandum in writing, usually denominated a certificate of deposit.

'Frankford, 31st October 1824.-John T. Drake this day deposited to the credit of John Wister, John M. Price and Charles J. Wister, seven thousand seven hundred and thirty dollars and eighty-one cents, which is subject to thier order upon presentation of this certificate. Signed, C. G. Waggoner, cashier. $7730.81.

On the 6th of November 1824, Mr Drake presented the certificate to the bank and demanded payment of the sum mentioned in it, in gold or silver, which was refused by the cashier, who at the same time offered the amount in notes on the bank, which were rejected by Mr Drake. At the time the deposit was made the notes of the bank were of the value of and current in the country at half their nominal amount.

The payment of the amount of the deposit in gold or silver having been thus refused, Wister, Price and Wister brought their action in the circuit court of the United States for the district of Kentucky. The declaration contained two counts, the first for money had and received, the second a special count upon the certificate of deposit.

At November term 1826, the defendants appeared by attorney, and afterwards filed a plea to the jurisdiction of the court under the corporate seal of the bank. The plea states 'that the court ought not to have or take cognizance of this action, because the defendant is a body corporate and politic, created and established by an act of assembly of the commonwealth of Kentucky and constituted by the name and style of 'The President and Directors of the Bank of the Commonwealth of Kentucky,' and that the whole capital stock of the said corporation is exclusively and solely the property of the commonwealth of Kentucky, and that the state of Kentucky in her political sovereign capacity as a state, is the sole, exclusive, and only member of the said corporation.' To this plea the plaintiffs below demurred, and the circuit court having sustained the same, the defendants were ordered to answer over.

Upon the trial of the cause, the plaintiffs proved the facts as stated; and the defendants moved the court to instruct the jury that the plaintiffs had not made out a good cause of action, and that the plaintiffs were not entitled to the nominal amount of the deposit; but to the value of the notes at the time of the demand.

The court overruled these motions, and instructed the jury that the plaintiffs were entitled to the full sum as expressed in the certificate, with interest thereon, from the date of the demand, in lawful money of the United States. The defendants excepted to the opinion of the court, upon all the matters submitted to them, and the case came before this Court upon the bill of exceptions. The facts of the case were not controverted.

For the plaintiffs in error, Mr Nicholas maintained,

1. That the circuit court had no jurisdiction over the cause.

2. The declaration was insufficient.

3. The court erred in the instructions given to the jury.

He argued, that upon the decisions of this Court the jurisdiction could not exist in the case. The courts of the United States take jurisdiction; 1st, According to the subject matter; 2d, The character of the parties; 3d, In cases arising under treaties, &c.

In this case the jurisdiction cannot be assumed, as those principles upon which the courts of the United States would have jurisdiction from the character of the parties; forbid the same. This Court will look behind the act of incorporation to ascertain who are the corporators; and if they find they are not such parties as can sue or be sued in the circuit court, they will refuse to acknowledge that the court could exercise jurisdiction. Cited, The Bank of the United States vs. The Planters Bank of Georgia, 9 Wheaton, 904.

In this case the state of Kentucky is the only stockholder of the bank; and this appearing, the state is the party, and cannot be sued. It is a sole corporation, using the money of the state, and by its obligations binding the state. The interests of the state are alone involved in the suit, and the judgment of the Court will operate upon the state directly.

2. The declaration is insufficient, because, as the real party defendant is the state of Kentucky, this action should have been so brought, and can only be so sustained.

This Court has decided that a corporation can bind itself by a provision, without seal. In other states of the union, the same principle has been acknowledged; but it is otherwise in Kentucky. In the supreme court of that state, it has been adjudged, that unless this obligation or promise of a corporation is under seal, it is not binding. 1 Marshall's Kentucky Reports, 1. This has now become a part of the municipal law of the state; and it will be regarded in this Court in cases where the decision applies. The certificate of deposit given by the bank was not, therefore, legal evidence of the promise.

3. In this Court it has been held that bank notes are not money; and this action, which is for money had and received, cannot be sustained, as the notes of the bank only were received.

It may also be urged, that as the notes are payable to J. T. Pendleton, or bearer, there should have been an averment that he was a citizen of Kentucky. The action cannot be supported unless the citizenship was stated; this Court not having jurisdiction, unless J. T. Pendleton was a citizen of Kentucky, and averred so to be in the pleadings.

Mr Caswell, for the defendants in error.

The plea of the president, directors, and company of the bank of the commonwealth of Kentucky expressly avers an act of incorporation, constituting them a corporation by that name. That there are no stockholders but the state, the stock belonging to the state of Kentucky only.

Thus it appears that the real corporators are the president and directors, citizens of Kentucky; and this Court has decided that it has jurisdiction in such a case.

That the stock of the bank belongs to the state of Kentucky, will not prevent this Court from sustaining the suit. The plaintiffs in error are a corporation with all the ordinary powers and incidents of such a body. Among others to lend money to the commonwealth of Kentucky. Can it be said that such a body is not suable, and that it is not the corporation, but the state of Kentucky who is the plaintiff in error; and that her rights as a sovereign state were violated by the suit in the circuit court?

The plaintiffs in error have a legal entity, independent of the state. They exist under the law, and they pay and receive money, and by themselves make contracts which they must perform. Unless subject to suits upon such contracts, there is no remedy for those who have claims, as no suit can be brought against the state.

The amount of the plaintiffs' claim must be that mentioned in the certificate. Had it been the intention of the parties to limit the same to what was the current value of the notes when this deposit was made, this should have been declared. This Court can know no other amount but that mentioned in the certificate, or any other money than the lawful money of the United States.

In reference to the claim of the counsel of the plaintiffs in error, to apply the decision of the court of Kentucky to the contract of the bank, in opposition to the law of this Court holding corporations liable under obligations not under seal; it was argued that this Court will not permit the decisions of a state court to contravene the general law, whatever respect it may be disposed to pay to the decisions of such courts upon the statutes or local laws of the place.

Mr Justice JOHNSON delivered the opinion of the Court.