Nesmith v. Sheldon - 48 U.S. 812 (1849)
U.S. Supreme Court
Nesmith v. Sheldon, 48 U.S. 7 How. 812 812 (1849)
Nesmith v. Sheldon
48 U.S. (7 How.) 812
The Legislature of Michigan passed an Act on 15 March, 1837, entitled "An act to organize and regulate banking associations," and on 30 December, 1837, an act to amend the former act. By the first, any persons were allowed to form associations for the purposes of banking upon the terms specified in the law; and by the second, the stockholders were made liable, in their individual character, under certain circumstances, for the debts of the association.
The associations formed under these acts are corporations within the meaning of the Constitution of Michigan, and the acts are unconstitutional and void.
The second section of the twelfth article of the Constitution forbidding the legislature from "passing any act of incorporation unless with the assent of at least two-thirds of each house," the judgment of the legislature is required to be exercised upon the propriety of creating each particular corporation, and two-thirds of each house must sanction and approve each individual charter.
The Supreme Court of the State of Michigan has so construed its Constitution, and it is the established doctrine of this Court, that it will adopt and follow the decisions of the state courts in the construction of their own statutes where that construction has been settled by the decision of their highest judicial tribunal.
This case was formerly before this Court, on a certificate of division in opinion between the judges of the Circuit Court for the District of Michigan. Its facts and the reasons for its dismissal will be found in 47 U. S. 6 How. 41.
It now came up upon the following certificate of division in opinion.
"This case having been remanded by the supreme court on the ground that it had not been properly certified on certain points under the act of Congress, and the cause being brought before the court for their consideration and decision, the opinions of the judges are opposed on the following point:"
"Whether the banking associations organized under the act of the Legislature of the State of Michigan entitled "An act to organize and regulate banking associations," approved March 15, 1837, and the amended act entitled "An act to amend an act entitled An Act to regulate banking associations and for other purposes,'" approved December 30, 1837, were or were not corporations or bodies corporate, within the meaning of the Constitution of the State of Michigan."
Article fourth, section first, of the Constitution of the State of Michigan is as follows: "The legislative power shall be vested in a Senate and House of Representatives."
Section second of article twelfth of said Constitution is as follows: "The legislature shall pass no act of incorporation, unless with the assent of at least two-thirds of each house."
The first act referred to in the question upon which the judges decided, namely, that of March 15, 1837, authorized any persons to form associations for the purpose of banking upon the terms specified in the law. It was passed by a vote of two-thirds of each branch of the legislature.
The second act referred to provided as follows:
"That for all debts of such banking association, the directors thereof, if such association shall become insolvent, in the first place shall be liable in their individual capacity to the full amount which such insolvent association may be indebted, and each other stockholder shall thereafter be also in like manner, in proportion to his or her amount of stock, for the payment of the full amount of the debts of such insolvent association."
The bill filed by the Nesmiths claimed to hold the defendants responsible, as stockholders, for the debts due by the Detroit City Bank.
The bill was demurred to, and, upon the hearing, the division between the judges occurred as above mentioned, and was certified to this Court.