Unknown County MI Archives Court.....Barnum, Vs Bank Of Pontiac 1837 ************************************************ Copyright. All rights reserved. http://www.usgwarchives.net/copyright.htm http://www.usgwarchives.net/mi/mifiles.htm ************************************************ File contributed for use in USGenWeb Archives by: Deb Haines http://www.genrecords.net/emailregistry/vols/00003.html#0000719 August 9, 2008, 6:41 am Source: Cases In Chancery Written: 1837 Cases in Chancery. Hiram Barnum v. The Bank of Pontiac. Injunction against bank, what not sufficient cause. By the act incorporating a bank a previous act was referred to, and in effect made a part thereof, which provided that if any bank did not pay its notes on demand, the charter should not for that cause be dissolved, but it gave the bank sixty days within which to redeem its notes. It contained further provisions that the act should not prevent the issuing of an injunction, and that one might be issued when any bank should refuse to pay its debts. Held, that these provisions relative to injunctions did not change the previous law on that subject. The provision that an injunction might be issued on a failure to pay was not imperative, but left it to the sound discretion of the court, upon a proper case being made. Where a bill alleged merely a demand and refusal by the bank to pay its notes, and contained no allegations of any impending mischief, danger or hazard of the rights of complainant, an injunction was refused. Effect of injunction against a bank. An injunction against a bank goes to prevent all action whatever, and is rather in the nature of a final injunction which is sometimes granted at the termination of a cause, than the usual injunction to prevent some particular mischief. Cause for injunction against bank: Notice. Except in cases where the bill is filed by a bank commissioner, showing fraud, violation of the charter, or insolvency, notice should be given of an application for an injunction against a bank, and a case should be made out that would warrant the court to wind up the concerns of the bank. (a.) Motion for an injunction. The facts are sufficiently stated in the opinion. Wm. Hale and P. Morey for the motion. Bates & Walker contra. The Chancellor.—This application is founded upon the act of June 21, 1837. This bill alleges merely a demand and refusal to pay. It contains no allegations of any impending mischief, danger or hazard, of the rights of the complainant. It presents no one of the ordinary features required to authorize this summary interposition, according to the general principles of proceedings in chancery. In the act of incorporation of the bank of Pontiac, the act of April 23, 1833, is specially referred to, and in effect is made a part of its charter. That act provides, if any bank shall not pay its notes on demand, the charter shall not, for that cause, be dissolved, and gives such bank sixty days within which to redeem its notes. It further contains a provision that that act shall not prevent the issuing of an injunction. It may become necessary to examine for what causes an injunction could have been issued under that act. Very clearly, the mere provision that the "act should not prevent the issuing of an injunction" does not change the law or the practice of the court in this respect. It may, therefore, be premised that the legislature contemplated that a case should be made which would authorize the exercise, according to the course and practice of this court, of this summary interposition. The act of June 21, 1837, which is relied upon in this application, provides that an injunction may be issued, when any banking institution shall refuse to pay its debts. It has been urged that the act last mentioned is imperative; that whenever there is a demand and refusal to pay, the injunction must issue of course. To act upon this construction would lead to results so variant from the uniform course of equity proceedings, that the court must pause before adopting it. 1. It would open the door to collusion. 2. It would almost invariably lead to unjust and inequitable results. If the construction contended for of the act of 1833, and the act last mentioned, shall obtain, that an injunction must be granted on demand and refusal, and that upon payment of the amount claimed in the bill and twenty per cent in sixty days, the injunction shall be dissolved, the most probable result would be that the bank enjoined, struggling for existence, will within the limited period redeem the amount claimed by the bill, although by doing so it would be unable to pay the remaining creditors of the bank; and this under the direction of the court. But it is still bound by the statute to become an accessory in enforcing this unjust distribution. There are other objections to which this construction would lead. From the statutes and from the settled practice, a legal discretion in this as in other cases, must be exercised. This being granted, how shall this be done, or rather what rule, applicable alike to all cases, shall be adopted. In view of the difficulties and consequences which have been before alluded to, I know of no better rule than the usual test, where an injunction is asked, in the first instance, to require that a case shall be made showing immediate danger or some impending mischief. From this it will follow that the application in this case must be denied. It has been contended that the act of 1837 is so far ex post facto in its operations that it must be regarded as unconstitutional, and therefore of no validity so far as regards the banks subject to the law of April 23, 1833. After arriving at the conclusion before stated, it may not, perhaps, be necessary to consider that question. Without saying that it is unconstitutional, and I am as yet unable to come to that conclusion, it is for the present sufficient to say that it would operate with great severity upon the banks, and with great inconvenience to the public, if the act of 1837 is regarded as imperative; if an injunction must issue at all events when a bank shall refuse to pay any one of its notes. It is stated by the chancellor, in the case cited in Hopkins, 591, that these are rather in the nature of the final injunctions that are sometimes granted at the termination of a cause, than the usual injunctions to prevent some particular mischief. An injunction against a bank goes to prevent all action whatever. It is, for the time being, an utter prostration of all its powers. Hence, except in cases where the bill is filed by a bank commissioner, showing fraud, violation of the charter or insolvency, courts require notice, and proceed with caution. And it seems to me that it is not too much, and is consistent with the discretion which the court is bound to exercise, to require such a case to be made, as would authorize the court, if it prove true and according to the exigency of the case, to wind up the concern, and make an equal distribution of the assets among all the creditors. This may be made out by immediate pending insolvency, and therefore danger to all the creditors; or such danger of a misapplication of the funds belonging to the bank as would require the interposition of the court for the safety of its creditors. The decision upon the other points made in the argument, as well as the point last referred to, and also upon what precise state of facts this court would feel itself bound to proceed and wind up this or any other bank, will be more appropriate when the case shall have been heard upon the presentation of such facts before it. Motion denied. --------------- (a.) See the cases of Attorney-General v. Oakland County Bank, Wal. Ch., 90, and Attorney-General v. Bank of Michigan, post, 315, for the general principles governing the court in granting injunctions against banks on the application of the proper public officer. Additional Comments: CASES DETERMINED IN THE COURT OF CHANCERY FOR THE STATE OF MICHIGAN BY ELON FARNSWORTH, Chancellor File at: http://files.usgwarchives.net/mi/unknown/court/barnum28gwl.txt This file has been created by a form at http://www.genrecords.org/mifiles/ File size: 8.3 Kb