The opinion of a majority of the Court, Whitman C. J. concurring with the other Judges in the result, but giving his reasons in a separate opinion, was drawn up by
Shepley J.This suit is upon a negotiable promissory note for the sum of seven thousand and three dollars, made by the defendants on April 1, 1837, and payable to the bank on the first day of October following. The case is submitted, as an agreed statement, upon the deposition of Cornelius Bedlow, jr. who was formerly the cashier of the bank.
Several grounds of defence are presented in a written argument for the defendants. The burden of proof is upon them. One is, that the promise was made without consideration. Bedlow states, that “ the amount of stock taken by them, for which said note was given, was sixty-eight sharesand that they became stockholders on the books of the bank for those shares on that day; but no certificates of stock were ever delivered to them. A person becomes legally entitled to shares *264by having them transferred to him upon the books of the baiik. The certificate is but additional evidence of his title. That the title was conveyed by a' transfer upon the bank books is shown by several provisions of the statutes then in force. That was the evidence of title, upon which they might be attached on a writ, or seized and sold upon an execution; and upon which the cashier was to rely, when he gave to an officer a certificate to enable him to attach and sell them. The sale by an officer would transfer the title without regard to any certificate, which the owner might hold. Ch. 60, § 6, 7, 8, and Ch. 519, § 18. The cashier might be required by the twenty-second section of the last named chapter to make a return under oath of the names of the stockholders and of the amount of stock owned by each. This he could only do by an inspection of the bank books. The twenty-eighth section provided, that the liability of a stockholder should not continue beyond the term of one year after he should have duly transferred his stock, showing that the title passed by the transfer. Indeed, it was then the only mode of conveying the title; for this transfer was made before the passage of the act of 1838, c. 325, which authorized a transfer by an indorsement and delivery of the certificates and an entry of that transfer upon the records of the corporation. The fact, therefore, that no certificates were delivered, did not prevent the defendants from becoming the legal owners of the shares. Nor did the other facts stated by the cashier, that the directors exercised the entire control of the stock, and managed it as the property of the bank, received the dividends, and paid the taxes upon it, change or destroy their legal title. The sale of the two shares could have been effectual, by the directors, only by a transfer on the books made by the defendants, or by their consent. They might at any time have transferred the other shares, and the bank could not have resisted their right to do so. Those shares might have been seized and sold on an execution against them, and conveyed as their property. The legal title would not be affected by their permitting the bank to treat them as its own property.
*265It is further contended, that they did not become the owners of those sharers, because they were illegally transferred before the capital had been wholly paid into the bank. The statute, c. 519, <§> 3, provided, that the capital should be paid “in gold and silver money in manner following, to wit: one half within six months and the other half within twelve months after receiving said charter.” And that no bank should go into operation until fifty per cent, of its capital had been thus paid. This fact was to be ascertained and proved in the manner prescribed by the statute ; by Ihe appointment of commissioners to examine and count the money actually in its vaults; and to ascertain by the oaths of a majority of its directors, that so much of its capital had been paid towards payment of their respective shares; and to return a certificate of the facts to the office of the secretary of state. As the bank continued in operation for several years, this must be presumed to have been done. No mode of proof was prescribed by the statute, that the last half of the capital had been paid within the time allowed. These enactments wrcrc probably designed to insure a solid capital, and to prevent irresponsible persons from taking the stock, that they might speculate upon it by a transfer without being obliged to pay for it. The intention was to prohibit a transfer until after the whole capital was required to be paid in. The intention could not have been to prohibit and render illegal, transfers made many years after that time, upon proof, that the whole capital of the bank bad never, in fact, been wholly paid in. The effect of such a construction would be, that such sales made between parlies, both of whom Were innocent and ignorant of any error or violation of law, must be considered as illegal and void, if it should be proved, that some fraud liad been practised upon the commissioners, to procure an erroneous certificate, or that the last half of (die capital, by some error or misconduct, had not in fact been all paid in. Such consequences could not have been intended; and the language does not necessarily require such a construction. The design appears to have been to require the whole capital to be paid within twelve months after receiving the *266charter, and to prohibit a transfer of the shares during that time. The charter of this bank, being then a private act, took effect, and was therefore received, on April 1, 1836 ; and the transfer of these shares on April 1, 1837, was not made within twelve months after receiving the charter; for an act might have been legally done under the charter on April 1, 1836. Com. Dig. Temps, A.; Castle v. Burditt, 3 T. R. 623; Priest v. Tarlton, 3 N. H. R. 93; Wheeler v. Bent, 4 Pick. 167; Windsor v. China, 4 Greenl. 303.
Another ground of defence is, that the defendants held the shares as agents of the bank; and that the bank, by a written contract, agreed to indemnify and save them harmless from this nóte.
In no proper sense can they be considered as the agents of the bank, in making their own note payable to the bank. Whether they can be enabled to resist successfully the payment of it by such a contract, must depend upon the testimony of the witness. He states, in substance, that there was an agreement, reduced to writing, when the note was made; that he made two copies of it, one for each party; that these were signed by the directors, and not by the defendants; that both parts remained in the bank until the month of January, 1842 ; that he asked one of the defendants, on two different occasions, whether it was not best to have the contract signed, as he might feel safer to have it, who replied in substance, that he trusted to him, that all was safe, and to be informed, if there was apprehension of any thing ; that in 1841 the defendants desired to have the contract renewed, and signed by the directors then in office; that he thereupon copied it, substituting the names of the existing directors for those of the former, and altering the date to December 1, 1841. This does not appear to have been signed by either party; and the defendants must rely upon the one bearing date on April 1, 1837, a copy of which is annexed to the deposition. Speaking of that, the witness says, “ the parties considered the agreement as closed on the part of the bank; and the papers were left with me to be passed or delivered to the respective parties, whenever they *267should be signed by Messrs. Burr and Holbrook;” that they “ always claimed the benefit of said agreement;” and “throughout the whole time” they “ considered me as holding the bond for them.”
Their rights must depend, not upon what they, or the parties, considered them to be; nor upon the facts, that the parties considered the agreement closed on the part of the bank, and that the defendants claimed the benefit of it; but upon the application of the principles of law to the facts proved. The copy annexed to the deposition purports to be an agreement between certain persons named, of the first part, and the defendants of the second part, by which the parties of the first part engage to indemnify and save harmless the parties of the second part, from this note, and from all paper arising out of it, and to pay all taxes on the shares. While the parties of the second part, upon performance and a surrender of their note, engage to convey the shares to the parties of the first part, and to permit them to receive all dividends. The persons named as the first party, are not stated to be directors of the bank; and they do not profess to make the agreement in that capacity, or to act in behalf of the bank, or for its benefit. The shares were not to be conveyed to the bank, but to them. The contract purports to be one made between individuals acting for themselves alone. It does not, however, appear to have become binding upon any person. The copy signed by the parties of the first part, was not to be delivered, until the counterpart of it had been signed by the other party. It is apparent, that they could not have intended to be bound to indemnify the defendants without being entitled to a conveyance of the shares. The defendants chose not to bind themselves by signing to make a conveyance of them. Instead of doing it, they required a new contract, in December, 1841. The supposed contract cannot, therefore, affect the rights of these parties.
Defendants to be defaulted.
Whitman C. J.— It seems to me that the same principles *268should govern in the decision of each of these cases. I shall therefore, proceed to the consideration of them together. By an act of the legislature the plaintiffs were, in 1836, incorporated as a banking company; and were authorized to raise a capital of fifty thousand dollars to be employed in banking operations; with all the powers and privileges, and subject to all the duties, liabilities and requirements specified in the act, “ entitled an Act to regulate banks and banking,” passed in 1831.
It is well known that the legislature have at all times been solicitous to guard, as far as might be practicable, against abuses in banking operations. In accomplishing such a desirable object numerous difficulties have been encountered. Banks in comparatively obscure places, with capitals of inferior magnitude, have been called for. The cupidity of individuals, in such cases, too frequently comes in conflict with the safety and rights of large portions of the people, who are, continually, and in accordance with the obvious design of banking institutions, becoming creditors thereto. The act of 1831, contains numerous provisions, designed to guard against evils resulting from such causes. It is therein enacted, ($ 2) that no bank shall make loans upon a pledge of its own stock; and in § 3, that no bank, thereafter incorporated, shall go into operation until fifty per centum of its capital shall have been paid in gold and silver ; and be actually in its vaults; and that this shall be proved by the oaths of a majority of its. directors; and that the same has been paid in by its stockholders, toward payment for their respective shares, and for no other purpose; and that it is to remain a part of its capital stock,. And it is provided, further, in the same section, that the residue of the capital stock shall also be paid in gold and silver in six months next thereafter; and that no part of the capital stock of any bank shall be sold or transferred, except on execution or distress, or by executors and administrators, until the whole of the capital stock shall have been so paid in. And in § 27, it is provided, that no stockholder shall, at any one time, hold and own more that twenty per centum of *269its capital stock. By *§> 38 and 34, in case a bank shall fail to pay any of its creditors within a certain time after demand therefor made, and after certain proceedings shall have taken place preparatory thereto, commissioners may be appointed, who are to take its funds into their hands, and are authorized to commence and prosecute, in the name of the corporation, or in their capacity of commissioners, any action necessary to the collection of debts due to it. And by the act, c. 315, of 1828, § 3j ^ was provided, if any director or other stockholder shall aid and abet any person in borrowing and receiving from any bank any sum of money, or in otherwise becoming, for a valuable consideration, indebted to such bank with a fraudulent intent, that such sum borrowed, or debt owed, shall not be paid, and that creditors thereby shall suffer loss, and that the bank bills or bank notes, due from such bank, shall not be paid, he shall be subjected to a penalty. These provisions are all in substance reenacted in the Revised Statutes ; and show very fully what is intended to be insisted upon by the legislature. We should now look into the cases before us, and see whether these rules have been infringed.
It appears, that this bank went into operation in September or October, of the year its charier was granted ; and on the stock, in reference to which the notes of the defendants were given, there is not the least reason to believe, that any percentage, in gold or silver, was ever paid into the bank. This stock amounted to one hundred and eighty-eight shares, being nearly nineteen fiftieth parts of the whole capital stock. The defendants deposited their notes in the bank for the par value of these shares ; and for what purpose ? It was not, as they contend, because they were, in consideration thereof, to become the real bona fide owners of the stock. The bank, as they contend, had become virtually the owners of the whole of it; and ever afterwards treated it as their own. For what purpose, and with what understanding, then, did the defendants give their notes ? Clearly to enable the bank to hold out to the public the appearance of that portion of its funds as genuine, when in fact both the defendants and the bank meant *270it for nothing but a fiction. Such a transaction can be regarded in no other light than as an attempt to perpetrate a gross fraud.
It is, however, contended, that the parties were in pari delicto; and that, therefore, potior est conditio defcndentis. This proposition would avail the defendants, if the nominal plaintiffs were the exclusive and real parties in interest; but this is not the case. Banking corporations are but trustees. They are artificial bodies; created with a view, in a great measure, to the public interest. The enactments before recited show, that, although they aré entrusted with the funds of a large number of stockholders, and bound to manage them for their interest, they are also under obligations to hold, and so manage those funds, as to secure to their creditors, if practicable, an entire exemption from loss'. This the nominal plaintiffs, the trustees in this case, have not done; and the defendants colluded with them in their misconduct. The cestuis que trust, the creditors of the bank, and the real parties in interest in this case, are innocent; and, if the conspiracy between the nominal plaintiffs, and the defendants, should be allowed to succeed, must be the sufferers. This action is prosecuted by those, who have been appointed by authority, in pursuance of the laws before referred to, solely to look after and secure the rights of the creditors of the nominal plaintiffs. When this shall have been accomplished the funds, if any remaining, are to be restored to the corporation. We cannot, under such circumstances, shut our eyes, and refuse to see that creditors may be defrauded, unless the defendants are holden responsible. The creditors therefore are not to be affected by the maxim referred to. The. defendants cannot succeed, but by taking advantage of their own wrong against innocent parties, which the law will not permit. The pretended agreement, therefore, between the nominal plaintiffs and the defendants, as to the cancelling of the notes without actual payment, if it ever existed, must, so far as the parties in interest here are concerned, be regarded as null and void.
*271It is further insisted in the defence, that there was no consideration for the promises of the defendants. And it may be admitted, that they have derived no pecuniary benefit from the stock, in reference to which their notes were given. But a consideration may consist of harm to the promisee in interest when no benefit may have accrued to the promisor. The defendants promised the nominal plaintiffs, to pay them large sums, with a design, as we must believe, to aid them in practising a deception upon all, who might be induced to give credit to the ability and solvency of the institution ; and especially to the plaintiffs in interest in these suits. The notes, according to the showing of the defendants themselves, were given and continued among the ostensible assets of the nominal plaintiffs, for nearly or quite the whole time, the bank was in operation, a period of nearly six years. During all that time the bank was enabled to exhibit these notes to the bank commissioners, annually appointed to inspect the doings of the banks; and to make return semi-annually of their affairs to the Governor and Council, comprising the amount due on these notes among the debts due bona fide to the bank : thus concealing from the public, and the plaintiffs in interest, that these notes were not regarded as constituting a part of their available assets, if such were the fact; and the defendants cannot be regarded otherwise, than as having aided the nominal plaintiffs, wittingly and willingly, in holding out to the plaintiffs in interest, these notes as a substantial portion of the resources of the bank, to enable it to redeem its circulating paper. The defendants, therefore, it seems to me, cannot be permitted, now to set up, in defence of this action, that their notes were not given for a valuable consideration.
But a distinction is supposed to exist between the two first named cases, and the last; and that defaults must be entered in the two former, in which T concur, and that a nonsuit must be entered in the latter, in which, for the foregoing reasons, I do not concur. It is true that a fact exists in the latter, which does not exist in the former. This fact, however, which is, that the stock for which the note of the defendants in the *272latter was given, was not actually transferred to them by name, but stood in that of the bank. To me, so far as it regarded the bank, and the defendants, in relation to their respective rights this was but a mere formality. True it is, that, as it might have affected the rights of the creditors of the defendants, it might have been otherwise. But no such question arises; and aside therefrom, and, as between the bank and the defendants, there was essentially no distinction intended or actually existing. The stock in the one case stood in the names of the defendants on the books of the bank, and, in the other, in the name of the bank. Nevertheless, the parties concerned, regarded their situation, in reference thereto, as precisely alike. The bank, in neither case, considered the defendants as the owners of the stock; but treated it upon all occasions as their own; and the defendants, without the slightest pretence of claim on their part, have ever acquiesced in their doing so;- and, moreover, the testimony of the cashier of the bank fully proves such to have been in accordance with the explicit understanding and agreement of the parties. There was, then, the same consideration for the promise in the one case as in the others. No position is more frequently laid down, nor more uniformly adhered to, than that contracts between parties, when the rights of third persons are not in question, are to be interpreted as they themselves understood them, when no stern rule of law interferes to prevent it, and none such occurs in this case. No one can fail to perceive, that the imputation of a fraudulent purpose may be made with equal propriety in reference to either of the defendants, without the slightest discrimination. To my apprehension, therefore, it is clear, that they stand upon an equal footing; and that it will be a palpable perversion of justice to suffer any of them to escape from the liability to the plaintiffs in interest, which, by the terms of their contract, and by their conduct for a series of years they have deliberately incurred.