OPINIONS

OF THE

HON. EDMUND RANDOLPH, OF VIRGINIA:

APPOINTED TO THE OFFICE OF ATTORNEY GENERAL OF THE UNITED

STATES SEPTEMBER 26, 1789.

INTEREST ON CERTIFICATES FOR 1791.

Interest on certificates issued pursuant to the act of Congress passed August 4, 1790, is not allowable, and the courts would embarrass a system of finance by a determination in favor of interest for the year 1791.

PHILADELPHIA, August 21, 1791.

SIR: In the opinion given by Mr. Bradford and Mr. Ingersoll. I find the case of Mr. Robert Buchanan to be accurately stated; but after paying a respectful attention to the sentiments of those gentlemen, I am compelled to say that I differ in the conclusion drawn from that statement, for I cannot agree that any interest is to be received upon the certificate for the year 1791.

I acknowledge that the certificate was issued in conformity with the act of Congress passed on the 4th of August, 1790, and that its silence. as to interest is no objection to such a claim, if that act warrants it.

A subscription to a loan is therein proposed, payable in certificates issued fr the domestic debt. Among these are some bearing an interest of six per cent., and others, called indents of interest, bearing no interest at all. Mr. Buchanan's certificate is founded upon indents of interest; and had they been subscribed, he would have been entitled to a certificate purporting that the United States owe to him, as the holder, or his assigns, the sum of $7,500, bearing an interest of three per centum per annum. He has not, however, subscribed those indents, but obtained the certificate from the Register of the Treasury before the 1st day of June, 1791, to wit: on the 16th of February, 1791, in pursuance of the tenth section of the above mentioned act. Upon the construction of that sec tion the decision depends.

The opinion asserts the first part of that section to be a substantive. clause, and yet in the next sentence it connects that clause with the following parts of the section. The truth is, that the section itself forms one integer. The term creditors comprehends all holders of the domestic debt which might be subscribed to the loan, and was not. It is immediately afterwards directed that such of them as possess the original certifi cates should exchange them for others, to be issued by the Register of the Treasury; consequently all the non-subscribing creditors are under the necessity of making this exchange, and, being so, must submit to the conditions prescribed for it.

One of these conditions is, that the new certificate shall not only specify the specie amount of those which are cancelled, but shall be otherwise of the like tenor with those heretofore issued by the Register of the Treasury for the registered debt. These import that the debt bears an interest of six per centum; and it is not denied that a new certificate given in lieu of cancelled indents, cannot carry an interest of six per centum. The question, then, is, whether a new certificate, which is not upon the most sanguine construction capable of a higher interest than three per centum, is of the same tenor with one granting an interest of six per centum?

It does not seem to be correct to resort to the popular and common acceptation of the words "like tenor," when they are known to be peculiarly technical. Nor can I admit that this acceptation would establish in this instance a likeness of tenor between two papers, so substantially different as in three per cent. per annum. The gentlemen, by confining their exposition to popular acceptation, virtually concede the interpretation of law to be against them. And without entering into prolix authorities, I take the liberty of saying that in every law proceeding which I can call to mind, it would be decided that there is a material variance between two such documents; and therefore that they could not be of the same

tenor.

But let us not content ourselves with resting on the criticism of single words: let us rather examine the context.

im

It is not for me here to estimate the merit of any scheme of finance: my office is to ascertain the sense of Congress. It strikes me, then, mediately, that the principal was far more respected than the interest, and that the higher interest allowed to the former was intended to correspond with that stipulated by the old certificates, whereas no interest was originally stipulated on the latter. It appears probable that, being anxious that all the indents of interest should be subscribed, they might have satisfied themselves of the propriety of distinguishing between subscribed and unsubscribed indents, because interest, not being demandable on the face of them, might in some measure be considered as a gratuity, which the legislature might apportion at pleasure.

That such was the meaning of Congress, is confirmed by the first clause in the tenth section itself, which gives to non-subscribing creditors interest during the year 1791, including interest to the last day of December, 1790; thus showing that creditors whose demands would carry interest to that time by force of the contract, were the persons contemplated: of this kind were indents for interest. And this idea receives confirmation from the care used in the third section to be explicit as to certificates carrying no interest, when they are really designed.

Upon the whole I cannot persuade myself that, with these strong fea. tures, indicating the purpose of Congress, the courts of the United States would embarrass a system of finance by a determination in favor of interest to Mr. Buchanan for the year 1791.

I have the honor, sir, to be, with great esteem and respect, your most obedient servant,

To the SECRETARY OF THE TREASURY.

EDM. RANDOLPH.

COMMISSIONERS OF THE BANK OF THE UNITED STATES.

The commissioners appointed in pursuance of the act incorporating the Bank of the United States have no power, as such, to superintend the election of directors, or to interfere therein.

PHILADELPHIA, October 18, 1791.

THE Attorney General of the United States does himself the honor of repaying to the questions propounded by the Secretary of the Treasury of the United States, in his letter of the 12th of October, 1791, as foilows:

1st. The commissioners appointed in pursuance of the act incorporating the Bank of the United States have no power, as such, to superintend the election of directors, or to interfere therein.

By the first section of that act subscriptions towards constituting the stock were to be opened, under the superintendence of such persons, not less than three, as should be appointed for that purpose by the President of the United States. The President was to appoint them accordingly; and the subscriptions were to continue open until the whole of the stock should be subscribed.

The fifth section provides that as soon as the sum of 400,000 dollars, in gold and silver, shall have been actually received on account of the subscriptions to the said stock, notice thereof shall be given by the persons under whose superintendence the same shall have been made, in at least two public gazettes printed in the city of Philadelphia; that the said persons shall, at the same time, in like manner, notify a time and place within the said city, at the distance of ninety days from the time of such notification, for proceeding to the election of directors; that it shall be lawful for such election to be then and there made, and that the persons who shall then and there be chosen shall be the first directors.

These are the only clauses which relate to the commissioners.

By the former clause their authority would have been concluded as soon as the whole of the stock was subscribed.

Nor was it extended by the latter, farther than to enable them to notify the time and place for proceeding to the election of directors; that is, the time and place, when and where, the persons capacitated to elect should proceed to elect.

The commissioners will, I suppose, appear with the books, that it may be known who were the original subscribers. But this duty naturally arises from their possession of those books, which are the best evidence of the original rights. The superintendence of the election has no analogy to such a possession.

2d. But does the smallest necessity exist why the commissioners, as such, should become the judges or superintendents of the election, or in any manner intermeddle in it? Is it not familiar to the experience of every day that persons assemble, with equal privileges of suffrage, and without the pre-eminence of any one of them, in order to constitute a body for the management of business? The first step is to appoint a moderator, or chairman. In the present instance the stockholders may with ease choose one or more persons to receive and count the votes, to report the numbers, minute the proceedings, and notify to the newlyelected directors their nomination. This seems to be a completion of the work.

3d. Although in the 5th section of the act which requires the first election of directors, it is not said by whom it shall be made; yet is the connexion between that and the 4th section so intimate as to render it certain that it must be made by the stockholders or proprietors of the capital stock.

Whether these terms be synonymous or not, it is immaterial here to examine. It is sufficient to say that no man can be one or the other except by virtue of an original subscription, or an assignment duly made of that subscription. Here lies the essence of the difficulty. Can an assignment be made before the first election of directors? The scrip, it is true, may be contracted for; may be delivered into the hands of the purchaser; and the price may be actually paid. But it is a creature of the bank law, and its mode of transfer depends upon that law. Accordingly it is de clared, in the 12th section, that the stock of the said corporation shall be assignable and transferable according to such rules as shall be instituted in that behalf by the laws and ordinances of the same. Now the election of directors precedes the institution of laws and ordinances concerning the assignment and transfer of stock; and therefore no assignment or transfer can, as yet, be legally made. It is true, indeed, that the delivery of scrip amounts to an agreement to transfer the stock when the laws and ordinances shall be instituted, and the seller will be compelled, in a court of law, to perform all acts which shall be hereafter necessary to the transfer. But an agreement to transfer is not an actual transfer. Hence I conclude that no holder of purchased scrip can be now accepted (merely in right of his purchase) as a voter for directors.

It is proper, however, to take notice of three objections which may be urged against these positions. The first is, that the giving of a power to the corporation to ordain rules of transfer does not exclude the usual modes of transferring personal property before those rules shall be formed. The second, that the provision, that after the first election no share shall confer a right of suffrage which shall not have been holden three calendar months previous to the day of election, implies that at the first election. shares assigned confer a right of suffrage; and the third, that if the present assignees be shut out, either a sufficient number of stockholders may not be found to elect, or the original subscribers, who do not retain a shilling of interest, will be admitted to a vote without any attachment to the common welfare.

To the first objection I answer, that the nature of scrip must be an acknowledgment of a certain subscription to the Bank of the United States; that it does not resemble a corporeal chattel, to which delivery constitutes a complete right, but rather a chose in action, concerning which the purchaser cannot, without the aid of a statute, use his own name judicially, but must use that of the original proprietor. Besides, the third section had already vested the corporation with ample power to regulate transfers; and the twelfth would have been nugatory had it not been intended to prevent transfers from being full alienations, without an observance of the rules to be established.

The force of the second objection is destroyed, when we recollect that, although it be admitted that at the first election, shares acquired at any time before, howsoever short, would give a vote, yet the clause undoubt edly had in view, what everybody expected, that the subscription would be filled by degrees; and, therefore, that no subscriber, even on the day

preceding the first election, should be deprived of a vote. The objection is also founded on too distant an implication to counteract reasoning otherwise weighty.

The consequence of the foregoing sentiments undoubtedly is, (as a branch of the third objection expresses,) that original subscribers, who may have sold out, and who no longer have a fellow-feeling for the success of the scheme, will be admitted to vote.

Is this the genuine construction of the law? If it be, it is not for any man to discuss the propriety of its consequences. I confess that a conse. quence extravagantly absurd, ought to lead us to be confident that Congress never contemplated it. But in many of the States we meet with a similar instance with the present. In certain elections none but free. holders can vote. In this none but stockholders or proprietors of capital stock can vote. Let it be supposed that the freeholder has agreed in writing to convey to another his freehold, has received the purchase money and delivered the possession; as in the case of scrip, the original subscriber may have agreed to sell-has endorsed upon it an assignment, and delivered it, so endorsed, to the purchaser. This agreement, as to the freehold, would be considered in the States to which I refer as giving an equitable title only to the buyer, and reserving the legal title to the vendor. So in scrip, the purchasers have the equitable, while the original subscribers retain the legal title. Who would vote in the case of the freehold? The helder of the legal title. Who, by a parity of reason, ought to vote for directors? The person who, being the original subscriber, is alone known as the holder of the legal title. I have seen none of those endorsements or writings by which scrip has been attempted to be transferred; and, therefore, will not undertake to say whether they amount to a substitution of the purchaser, as the proxy of the seller. He who claims to be a proxy ought to exhibit, if not a regular letter of attorney, at least some authentic appointment to the office. I have distinguished also between the real interest and the right of voting at the first election. Hence the conveyance of one does not absolutely involve the other. But I can conceive that the words of some of those endorsements may perhaps be broad enough to justify a demand of the right of a proxy.

4th. The proxies, however, of no subscriber can have more votes than himself. For example, four shares subscribed by one nan cannot, by being divided into the hands of four proxies, confer four votes, as would have been the case if each of them had subscribed a share. But what is to be done if a subscriber has appointed several proxies? He may ap point what number he pleases; but if they are divided they cannot be called the proxies of an individual, acting (if I may be permitted so to speak) integrally. To be the real proxies, then, they must concur. may prehaps be presumed, that if the subscriber were, in the division of his shares among his proxies, to make them representatives, respectively, of so many as would give them one or more votes, each might vote by himself. But their power being that of proxies only, they cannot claim separate suffrages because they spring from the separate holding of stock in one person, or, in other words, from separate subscriptions.

It

5th. The fifth question being answered in the foregoing observations, I forbear to repeat the answer. But I will now recapitulate the general result.