Sands v. Kimbark

By the Court,

Campbell, J.

This action was brought against the defendants as executors, by the plaintiff, as receiver of a mutual insurance company, and was referred to a referee, pursuant to the act of April 21st, 1862, passed to “ facilitate the closing up of insolvent and dissolved mutual insurance companies.” On the hearing before the referee, the defendants objected that the act under which the reference was ordered was unconstitutional and void, as impairing or taking away the right of trial by jury. The referee decided that the act was valid and constitutional, and this raises the important question in this case.

A quaint old writer in an article entitled “ a guide to juries,” printed in the “ Conductor G-eneralis,” published in the city of New York in 1749, after remarking among other things that that “ is the best law which leaves the least to the arbitrariness of a judge,” and that “judges represent the king's person; they are his officers and act in his stead,” concludes, (citing Bracton, 119,) “ they ought not at all be concerned in causes of life or member, &c. where the king is a party, for says he, “ the king is thus judge as it were in his own cause.” And he further remarks, “ thus appears what is the difference of judges and juries and something of the reason why the parliament has all along been so zealous for trials by juries, as no fewer than fifty-eight several times since the Norman conquest hath established and confirmed the trial by juries, no one privilege else, nigh so often remembered in parliament.”

This work, as I have stated, was published in New York in 1749, though it had been written in England. It was adapted to the practice in Few York, especially in proceedings before justices and courts of sessions, and the article on juries had a peculiar significance at that'period. There had been noted instances where an independent jury had stood between the court and the prisoner. A short time previous had occurred a memorable trial, that of Zenger, during the administration of Grov. Cosby, when by an arbitrary order the counsel of the prisoner was thrown over the bar, and all the power of the court and the government was brought to bear to insure a conviction. The jury however, in defiance of power, acquitted the prisoner. So at a still earlier day, during the reign of Queen Ann, where a dissenting minister was indicted for preaching without the queen’s license, an independent jury, in opposition to the charge of the court, returned a verdict of not guilty. There were also violent conflicts between several of the royal governors and the people of the colony of Hew York'in reference to the establishment of a court of chancery. It continued with more or less severity for nearly a century, and its. complete history would form an interesting chapter in the annals of our colonial jurisprudence. The objection to the court was mainly however founded .in political considerations. For a considerable portion of the time, the governor and council formed the court of chancery. Towards the close of our colonial existence the governor alone, was chancellor. That court at times exercised powers at least very questionable. Thus, during governor Hunter’s administration, he writes to the lords of trade, in 1712, that for some years no quit-rents had been paid, and that by advice of the chief justice and others, learned in the law, he had issued writs out of the court of chancery for the purpose of enforcing collection, and he adds, “ it appeared a combination by their own confession, several having owned that they were resolved never more to pay any, relying upon the sense and strength of a county jury, if they should at any time be sued for the same.” In 1717, the same governor wrote to the lords of trade as follows: that soon after his arrival “ the receiver general complained that there was a total cessation of payment of quit-rents, and begged for a remedy, he hoped for none in the common course of law, the delinquents not only trusting to, but bragging of the impossibility of finding juries in the country that would give a verdict for the crown, if left to a jury, upon which the delinquents were subpoenaed to the court of chancery, which immediately had its effect.”

Though the governor still continued as chancellor, the court of chancery at the close of our colonial existence had become firmly established. Thus Governor Tryon, the last of the royal governors, in June, 1774, thus refers to it: “ The province has a court of chancery in which the governor or commander-in-chief sits as chancellor, and the practice of the court of chancery of England is pursued as closely as possible. The officers of this court -consist of a master of the rolls, newly created, two masters, two clerks in court, a register, an examiner, and a sergeant at arms.” Thus it will be seen that the court, with the exception of a master of the rolls, had the same general organization before as after the revolution, and which with but unimportant changes remained down to the time of the adoption of the constitution of 1846. The same was true of the supreme court and the old court of common pleas, especially as to the former, down to 1821.

The supreme court, in colonial times, claimed to exercise and was admitted to possess all the powers of the English courts of king’s bench, exchequer and common pleas. From this glance at the courts before the revolution, we may perhaps be in some degree better enabled to understand that provision in the constitution of 1777, relating to the trial by jury. That constitution it i.s understood was almost if not entirely the production of the pen of John Jay. Though other able lawyers and illustrious statesmen were also members of the convention. The 41st section is as follows i “And this convention doth further ordain, determine and declare, in the name and by the authority of the good people of this state, that trial by jury in all cases in which'-it hath heretofore been used in the colony of New-York, shall be established and remain inviolate forever, and that no acts of attainder shall be passed by the legislature of this state for crimes other than those committed before the termination of the present, war, and that such acts shall not work corruption of blood; and further that the legislature of this state shall at no time hereafter institute any new court or courts but such as shall proceed according to the course of the common law’’

The constitution of 1777 was not submitted to the people for ratification. The convention was clothed with full powers to make the constitution, and so far as I am aware, no record was preserved of the debates, if any, which were had at the time of its adoption by the convention. But though the language of the section is broad enough to cover trials both in civil and criminal cases, yet from the context I am strongly inclined to think that the framers of that constitution had special reference to trials by jury in criminal matters. Ho acts of attainder were to be passed and no new courts established, which should not proceed according to the course of the common law—that is, no star chamber court or court of that character and form of proceeding. . The court of chancery, a court which did not in all things proceed according to the course of the common law, but which in some of its forms and maxims followed the civil law, was preserved by this same constitution in full force and vigor. The royal governor was no longer to be chancellor, but this judicial officer was to be appointed from- among the people by the governor whom the people should elect. The great object undoubtedly was to preserve to the citizen of the new state, what may have been his right and his boast when an English subject. “ The trial by jury in criminal cases is more peculiarly the grand bulwark of the liberties of every subject, and is secured as has already been mentioned, by the great charter, 9 Henry 3.”. (Jacob’s Law Dict. tit. Jury.) The language of the section of the great charter referred to is, “No freeman shall he taken or imprisoned or be disseized of his freedom or liberties or free customs, or be outlawed or exiled or any otherwise destroyed, nor we will not pass upon Mm nor. condemn Mm but by lawful judgment of Ms peera, or by the law of the land.” This becomes more obvious when we see with what unswerving fidelity on the part of all branches of the government, and especially by the judiciary^ the right to trial by jury in criminal cases has been maintained, even holding that the prisoner could not by consent, as in Oancemi's case, be convicted by less than twelve men. On the other hand, there has been frittering away -by legislatures and courts in civil cases, limiting the application of the constitutional inhibition in civil cases to proceedings where an issue was formed, and holding as valid and constitutional enactments under which by assessments and appraisals of commissioners and others, the property of individuals was taken for the use of the state or for corporations. In the convention of 1821, many members doubted whether it was wise to incorporate in the constitution what might properly be termed a bill of rights. So far as the civil administration of justice is concerned, there can hardly, I think, be a doubt that it is safe enough to leave it to be regulated by the legislature.

But assuming that the provisions in the constitutions of 1777 and 1821, have reference to trials in civil as well as in criminal cases, and which I admit is the fair construction of the terms, and has received the sanction of our courts; admitting this, does the case before us fall within the exceptions which have been recognized-; in other words, is it not a proceeding or trial as “ heretofore used,” without a jury P Does it properly fall, as claimed by the counsel for the plaintiff, within the equitable jurisdiction of the supreme court exercising the powers of a court of chancery ? Dissolving copartnerships and moneyed and other corporations, whether banks or insurance or manufacturing companies, appointing receivers, and regulating the collection and distribution of their assets, is a well regulated branch of equity jurisdiction. It belongs to a class of cases coming under the head of implied trusts.

.“ A court of common law,” says Mr. Justice Story, in his Equity Jurisprudence, § 1252, “ is incapable of administering any just relief, since it has no power of bringing all the proper, parties before the court, or of ascertaining the full amount of the debts, the mode of contribution, the number of contributors, or the cross equities and liabilities which may be absolutely required for a proper adjustment of. the rights of all parties as well as the creditors.” And in the Matter of the Empire City Bank, (18 N. Y. Rep. 210,) Judge Denio states the doctrine clearly' and concisely, that the winding up and settling the affairs of insolvent corporations from the very nature of the case, fell within the jurisdiction of a court • of equity, and that it was the constant practice of a court of chancery, “ to entertain suits for that purpose, and by its decree determine who were stockholders and contributors, and in what proportions they were to contribute, and to cause an account to be taken of the unsatisfied debts and liabilities, and to decree a distribution,” citing Slee v. Bloom, (19 John. 456,) and Briggs v. Penniman, (8 Cowen, 387.) The first of these cases grew out of the winding up of a manufacturing company, and a decree was made on the first hearing in the court of errors directly against a portion of the stockholders, for the payment of balances due upon their stock, or in proportion sufficient to pay the plaintiff’s debt, and as to other stockholders who claimed set-offs, the matter in controversy to be determined by a master in chancery. Briggs v. Penniman was also an action for dissolving a manufacturing corporation. The court of chancery decreed the corporation dissolved, and that the stockholders were liable for the debts to the extent of their respective shares, and referred it to a master to report the amount of debts and the proportions chargeable to the stockholders. This decree was affirmed in the court for the correction of errors, and in that .court Spencer, senator, thus tersely states the doctrine which applies in this case. “ The stock subscribed and agreed to be paid into the company became corporate property, and when paid in, might be reached by ordinary proceedings, and if not paid in, a court of equity would compel the trustees to collect and apply it to the payment of debts.” (Salmon v. The Hamborough Company, 1 Cas. Ch. 204. 1 Kyd on Corp. 273.) The same principle was acted upon in the case of Slee v. Bloom, in which the stockholders were required in the first instance to pay up the amount of their subscriptions for the benefit of the creditors.

Now in the case of these mutual insurance companies, every person taking out an insurance and giving his note to the company, becomes a member liable to contribute under certain contingencies for the payment of debts, the whole amount of his note. His case is analogous to that of a stockholder in other corporations who had paid in a portion of his subscription, and was liable to be called upon to pay in the balance if the exigencies of the corporation should require it. In both cases the subject matter falls alike within the jurisdiction of a court of equity. In the one case, the stockholder may not be required to pay in the whole balance of his subscription, and the member of the mutual insurance company may be called on to pay an assessment less than the amount of his note. The doctrine of contribution is applicable in both cases, and I am unable to see why this receiver could not on the equity side of this court, representing as he does both the insolvent and the dissolved corporation and its creditors, have commenced an action making all the members whose notes remained unpaid, and who were liable to contribution, parties defendants. It might be and doubtless would be a very unwieldy action, but I apprehend it would not be contended by the defendants, that they were of right entitled to a trial by jury. I think the law well settled the other way, not only by the cases in our own courts, but by numerous decisions in other states, and in England; that is, that the whole matter falls within the jurisdiction of a court of equity.

[Broome General Term, January 27, 1863.

Balcom, Campbell and Mason, Justices.]

The law of 1862 does not, therefore, confer or attempt to confer any new equity jurisdiction. It does not seek to transfer a subject matter which was previously only cognizable in a common law court over to a court of equity, and thus deprive a party of a trial by jury. Its aim is to point out and authorize a new and more speedy and inexpensive mode of disposing of the controversies which may arise, between the receiver and the members of a company in relation to their liability to contribute, and the amount of such contribution where the liability is conceded or established. The subject matters remain as before, but a more expeditious remedy is given. The equities are to be worked out by a somewhat different process. There is no longer necessity for an unwieldy action embracing all the members as parties.

When the motion for appointing a referee was argued before me at special term, by the able and ingenious counsel for the members of this insolvent company of which the plaintiff is receiver, I had at first grave doubts as to the constitutionality of the law of 1862. But subsequent examination and reflection have satisfied me that my original impressions were erroneous. Other reasons than those given might be stated; especially the proceedings in cases of the insolvency of individuals, might be referred to, as showing compulsory references prior to the constitution of 1846. But for the reason that the whole subject matter of the dissolving these companies and appointing receivers, and collecting and distributing the proceeds and payment of debts, was formerly and is still within the jurisdiction of a court of equity, in which court the matters in controversy were generally settled without a jury, and that the law of 1862 confers no new jurisdiction, but only authorizes a more expeditious and less expensive remedy, I am of opinion that such law is not unconstitutional.

The other points in this case have been heretofore disposed of. The judgment must be affirmed with costs.