U.S. Supreme Court United States v. Saline Bank of Virginia, 26 U.S. 1 Pet. 100 100 (1828)
United States v. Saline Bank of Virginia
26 U.S. (1 Pet.) 100
APPEAL FROM THE DECREE OF THE DISTRICT COURT OF THE
UNITED STATES FOR THE WESTERN DISTRICT OF VIRGINIA
The plaintiffs, as creditors of an unincorporated bank, filed a bill against the cashier and a number of persons stockholders of the bank for a discovery and relief, who, in reply to the bill, state that their answers to the bill would subject them to penalties under the laws of Virginia prohibiting unincorporated banks. Held that the defendants were not bound to make any discovery which would expose them to penalties.
This case came before the Court, on an appeal by the United States, from the decree of the district court of the United States, for the Western District of Virginia, in which court the district attorney of the United States filed a bill against John Webster, cashier, and a number of others as stockholders of the Virginia Saline Bank to charge them in their private capacities, for certain deposits of money made with them and also to subject their joint funds, &c.;
The bill charges that about the year ___ a company was formed by a number of persons, citizens of Virginia within that district, to carry on the usual and ordinary business of banking. That they established a banking house -- assumed the name and style of the "President, Directors, and Company of the Saline Bank of Virginia." That they issued notes or bills purporting to be payable out of the joint funds to make discounts and exchanges whereby circulation and currency was given to their notes and bills. That in discharge of public dues, $10,120 of their notes were paid into the Treasury of the United States before 21 October, 1819, and on that day, $5,831 in said notes were deposited by an agent of the Treasury with John Webster, cashier of the said association, who demanded payment therefor after obtaining a certificate of deposit, which payment was refused by Webster, who said he had no funds.
At the same time, the agent presented a draft drawn by the Treasurer of the United States for $4,290, being also for their notes received in the Treasury which was the balance of the said sum of $10,120. This draft was refused also for want of funds. The bill charges that Webster possessed funds of the company in specie and notes of solvent chartered banks, and combined with individuals of the company to refuse payment by fraudulently secreting these funds. The bill prays an account of the funds of the company, and also to subject the cashier and stockholders to a personal decree.
There was filed with the bill the following documents mentioned therein:
"1. Virginia Saline Bank, October 21, 1812, William Wham has deposited in this bank $5,831 in notes of the same for safekeeping -- to be returned to him, or his order."
"J. WEBSTER, Cashier "
"2. Virginia Saline Bank, 21 October, 1819. I certify, that William Wham, Cashier of the Bank of Columbia, acting as agent for the Treasurer of the United States, this day demanded payment of my receipt of this date in his favor for $5,831. That he presented a draft drawn by the Treasurer of the United States, No. 9,079, dated 18 March, 1818, in favor of Jonathan Smith, for $4,290, and demanded payment for the said deposit and the said draft, whereunto I answered that I was not prepared with funds, and could not pay the said draft or deposit at this time."
"J. WEBSTER, Cashier "
The above-mentioned draft, drawn by the Treasurer, is in these words:
"No. 9,079, Reg'd. March 18, 1818"
"for the Register,"
"No. 9079, Dr. 4,290."
"Treasury of the United States,"
"Washington, March 18, 1818"
"Sir: At sight, pay to Jonathan Smith, Esq. cashier Bank United States, $4,290, value received."
"T. T. TUCKER"
" Trea. U. States "
"JOHN WEBSTER, ESQ."
" Cashier Virginia Saline Bank "
To the bill of the United States the defendants filed the following joint and several plea, with the usual affidavit:
"These defendants, by protestation, not confessing or acknowledging all or any of the matters and things in the complainants' said bill of complaint contained to be true in such manner and form as the same are therein alleged and set forth, for plea thereunto say that the company which assumed the name and style of the 'President, Directors, and Company of the Saline Bank of Virginia,' whereof mention is made in the said bill of complaint, had not at the time of the issuing or of giving currency or circulation to the notes or bills in the said bill of complaint mentioned or at any time hitherto any charter incorporating the said company with authority to deal or trade as a bank, or any charter whatsoever, and these defendants further say that all the notes and bills issued by the said
company and to which circulation and currency was given as in and by the complainants' bill is supposed, were entitled and offered in payment by the said company, to-wit, at the time of the issuing of the said notes and bills, as charged and supposed by the said bill of complaint, to-wit at the Western Judicial District of Virginia, and these defendants aver that all the matters and transactions in the said bill of complaint stated and whereof discovery is sought relate to the emission of the said bills and notes by the said company, and to the offering the same in payment as aforesaid, all which matters and things these defendants are ready to aver, maintain, and prove as this honorable court may award, and these defendants are advised and insist that they ought not to be compelled to discover or set forth any matters whereby they may impeach or accuse themselves of any offense or crime or be liable by the laws of the Commonwealth of Virginia to penalties and grievous fines, for which cause these defendants humbly pray the judgment of this honorable court whether they shall be compelled to make any other or further answer to said bill of complaint, and humbly pray to be hence dismissed, &c.;"
"J. PINDALL, Defendants' Attorney"
The cause was set for argument on this plea by consent. The district court sustained the plea and dismissed the bill, from which decree the United States appealed to this Court.
The record contains the articles of association called for by the bill, with a list of the subscribers, the 4th article whereof is in these words, viz.,
"No stockholder shall be answerable in his person or individual property for any contract or engagement of the said company or for any losses, deficiencies, or defalcations of the capital stock of the said company, but the whole of the said capital stock, together with all the rights and credits and all the property, both real and personal, belonging to the said company, and nothing more, shall, at all times be answerable for the legal and equitable demands against the said company."
By the articles of association, it appeared that the subscription of the stock of the company began on 14 August, 1814.
The Legislature of Virginia had thrice enacted laws on the subject of unincorporated banking companies, in February and in November, 1816, and in August, 1817. Tate's Digest 41-42.
The following are the provisions of the laws of Virginia upon this matter:
"1. It shall not be lawful for any association, or company not having a charter incorporating such association or company with authority to deal or trade as a bank now formed or in being or which hereafter may be formed within the limits of
this Commonwealth for the purpose of discounting notes, bills, or other securities for the payment of money or other valuable thing and issuing notes, drafts, or bills, whether payable to order or bearer, or any other securities for the payment of money or other valuable thing, in the name or on account or for the benefit of any such association or company or otherwise for the purpose of dealing, trading, or carrying on business as a bank, to commence or continue the discounting of any notes or bills or other securities for the payment of money or any other valuable thing or the issuing of any notes, drafts, or bills or other securities for the payment of money or other valuable thing, or such dealing, trading, or carrying on business as a bank, and every member, officer, or agent of any such company or association that may so commence or continue such discounting or issuing of notes, drafts, bills, or other securities or the dealing, trading, or carrying on business as a bank shall be held and taken to be guilty of a misdemeanor, and, upon conviction thereof on indictment, information or presentment shall be liable to be fined at the discretion of a jury in a sum not less than one hundred nor exceeding five hundred dollars. And if any such company or association or any president, manager, cashier, or other officer or agent of such company or association shall pay out, deliver, put in circulation, or issue any note, draft, bill, or other security for the payment of money or other valuable thing purporting to promise, order, request, or stipulate the payment of money or other valuable thing, or that money or other valuable thing is payable by or on behalf of such company or association or any person or persons as agent or agents thereof, each member, officer, and agent thereof shall be in like manner liable to the same penalty."
"All contracts that hereafter may be made by individuals for the purpose of forming themselves into any association or company for discounting and issuing notes and other securities for the payment of money or other valuable thing as mentioned in the first section of this act, or dealing, trading, or carrying on business as a bank shall be, and the same are hereby declared to be utterly null and void."
"2. The capital stock of any association or company trading, discounting paper, or issuing notes in violation of this act, and all capital stock subscribed to such association or company shall be held in trust for the benefit of the commonwealth, and it shall be the duty of the Attorney General, whenever he shall be informed of the existence of any such company or association, to institute a suit in the Superior Court of Chancery for the District of Richmond in behalf of the Commonwealth for the purpose of recovering the capital
stock aforesaid. In such suit it shall be lawful to make all or any of the members of such company or association and any officer, agent, or manager thereof parties defendant, and to call upon and compel them or either of them to exhibit all their books and papers, and an account of all such matters and things as may be necessary to enable the court to make a decree in pursuance of the provisions of this act. The members of any such association or company made defendants in such suit shall be held severally liable to the Commonwealth for their respective proportions of the capital stock held in such company or association at the institution of such suit or the time of the decree, or by any person or persons for his, her, or their benefit, and the court shall decree against the defendants, respectively and severally, the amounts that they and each of them may respectively and severally hold as aforesaid, in the capital stock of such company or association or by any person or persons for his, her, or their use or benefit, to be levied of the proper goods and chattels, lands and tenements of such defendants, provided however that no disclosure made by any party defendant to such suit in equity and no books or papers exhibited by him in answer to the bill or under the order of the court shall be used as evidence against him in any motion or prosecution under this law, and that a recovery in such suit shall be a bar to every motion or prosecution against any defendant to such suit for the recovery of any penalty or the infliction of any punishment prescribed by this act."
See also 1 Randolph 71 to 101, inclusive.
The case was submitted to the Court without argument by the Attorney General of the United States and by Messrs. Webster and Dodridge, for the appellees.
MR. CHIEF JUSTICE MARSHALL delivered the opinion of the Court.
This is a bill in equity for a discovery and relief. The defendants set up a plea in bar alleging that the discovery would subject them to penalties under the statute of Virginia.
The court below decided in favor of the validity of the plea and dismissed the bill.
It is apparent that in every step of the suit, the facts required to be discovered in support of this suit would expose the parties to danger. The rule clearly is that a party is not bound to make any discovery which would expose him to penalties, and this case falls within it.
The decree of the court below is therefore