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The Legal Obligations of the New Mechanics Bank of Trenton, New Jersey
Trenton [New Jersey], 8 June 1837. Manuscript signed discourse written at the onset of the Panic of 1837, concerning the ethics and obligations of the Mechanics' and Manufacturers' Bank in Trenton which had been established less than three years earlier, by respected Trenton attorney and Whig politician William Halsted (1794-1878) who had recently been elected a Member of the United States Representatives to represent New Jersey, signed and dated in the original by the author. 8vo. 8 pages in manuscript, penned recto and verso, each leaf affixed to the next with two spots of glue to upper margin, measuring approximately 20 x 25 cm, and featuring an embossed cameo of a three-masted barque. William Halstead (1794-1878) was an American Whig Party politician who represented New Jersey at large in the United States House of Representatives from 1837-1839, and again from 1841 to 1843. Halstead graduated from Princeton College in 1812, studied law, and was admitted to the bar in 1816. He commenced practice in Trenton, New Jersey and soon earned a reputation as being one of the city's most distinguished lawyers. He was appointed reporter of the New Jersey Supreme Court on 23 November 1821, and served until 1832. He served as prosecuting attorney for Hunterdon County from 1824-1829 and again from 1833-1837. He published seven volumes of "Halstead's Law Reports". Halstead was elected as a Whig to the Twenty-Fifth United States Congress (4 March 1837 to 3 March 1839). He was again elected to the Twenty-seventh Congress (4 March 1841 to 3 March 1843), serving as chairman of the United States House Committee on Elections. Upon leaving congress, President Zachary Taylor appointed him the title of U.S. Attorney for the District of New Jersey, a role in which he served from 1849 to 1853. He raised the 1st New Jersey Volunteer Cavalry during the American Civil War, and served as its colonel until February 18, 1862. He retired from public life and spent the remainder of his life in Trenton. At the request of the Directors of the Mechanics' and Manufacturers' Bank of Trenton, from a legal standpoint, Halsted answers three specific questions regarding the bank's refusal (inability) to redeem paper currency into specie (silver or gold coins). His erudite assessment surely resulted in careful deliberation by the members of the board, while it provides for us now a scarce period perspective of the historic financial crisis. At the time, the bank's president was William Grant, its board of directors consisted of James Hoy, Ralph H. Shreve, William White, George Dill, Charles G. Green, Edward Waterman, Samuel I. Emley and Samuel Evans, and the cashier was Charles Parker. It is interesting to note that just prior to the crisis at hand, the town of Trenton was in a period of unusual prosperity, with factories, mills, and other buildings being erected throughout. In September 1836 the bank in question had also decided to construct a new building, approved by William Grant, who had become president in April 1837. Completion of the bank, unfortunately, was followed by a season of much financial distress. Halsted's discourse is dated 8 June 1837. A financial assessment of the Mechanics' and Manufacturers' Bank in Trenton was reviewed at the Legislature's General Assembly of 24 October 1837. The results of the investigation were submitted to William Pennington, Governor of the State of New Jersey, on 19 December 1837. Details are published in the "Votes and Proceedings of the Sixty-Second General Assembly of the State of New Jersey." While documentation reveals that this bank, like so many others, found itself unable to honor their notes in specie, the general public of Trenton believed in the stability of the Mechanics Bank and its directors. Perhaps also, the bank was in better condition than others. Following the publication of a detailed banking statement, as seen in the volumes of the Legislature, the State Gazette of 22 December 1837 published this remark, "The condition of The Mechanics Bank is now before the Community and it is proved to be worthy of great confidence." Halsted introduces the purpose of his work: "The following questions have been submitted to me on behalf of the Mechanics and Manufacturers Bank at Trenton, for my opinion." "First. Has the said Bank forfeited its charter by refusing to redeem in specie or other lawful money its bills or notes during the regular hours of doing business?" "Second. Can the Bank after such refusal to redeem its notes in specie lawfully discount paper, make contracts or transact its ordinary business as a banking institution? "Third. Should such refusal to redeem its notes in specie be declared by a competent tribunal a cause of forfeiture; and a judgment of such tribunal be rendered accordingly, would the acts contracts or proceedings of the Bank between the time of the commission of the act so adjudged a cause of forfeiture, and the time of the rendition of the said judgment be valid?" In response to the first question, he opines, doubtless to the Bank's distress, that "the neglect or refusal of the Bank to redeem in specie or other lawful money the notes of Bills issued by the Corporation, is a lawful cause of forfeiture." He clarifies that the failure merely exposes the Bank to proceedings which "may" result in "a judgment of forfeiture against it." On the second matter, he refers to "the language of the highest judicial authority, Chancellor Williamson, in the case of the Morris Canal and Banking Company, and the Society for Establishing the Useful Manufacturers." He goes on to quote Williamson's statement which explains that a corporation's failure to fulfill contractual obligations does not necessitate its extinction, and that it can continue operations. He provides further evidence for the same conclusion, stating, "This opinion of Chancellor Williamson is in accordance with the opinion of Chancellor Kent in the case of Slee against Bloom [New York City, 1822]... that a forfeiture of corporate rights must be judicially ascertained and declared, and that corporate power which may have been abused or abandoned cannot be taken away..." Finally, he turns to the late "Chief Justice Parsons one of the ablest Common Law Lawyers that ever sat upon a bench in the country"... and a trial between the Commonwealth of Massachusetts and the Unions Insurance Company, of which Parsons said, "An information for the purpose of dissolving the Corporation or of seizing its franchises cannot be prosecuted but by the authority of the Commonwealth to be exercised by the Legislation or by the Attorney or Solicitor General under its direction..." Perhaps most significantly, he confirms that "The decisions of the Supreme Courts of New York Connecticut Pennsylvania and Virginia are all in accordance with the opinions above cited." To the great relief of the Directors of the Mechanics' and Manufacturers' Bank of Trenton, he applies the aforementioned legal opinions, to conclude as follows: "... the Bank may, after its refusal to redeem its notes in specie, lawfully discount, and make contracts and pursue its ordinary business as a banking institution... the State only can prosecute for a forfeiture, and may waive the prosecution if it desires; it would be impossible for an individual against whom the bank might bring an action for the recovery of a debt or demand due to it, to set up as a defence that the bank had forfeited its charter... the judgement would therefore precisely be the same in such is case as if no such cause of forfeiture had ever existed... This principle is fully recognized in the case of the Chester Glass Company against Dewey in 16 Massachusetts reports... that the defendant cannot refuse payment for goods sold because the Company were prohibited from trading..." Again favourable for the New Jersey banking institution, his answer to the third issue at hand is rather encouraging, considering the economic crisis and recession that had only just begun. He concludes, "I am clearly of the opinion, that the acts and contracts of the Bank will remain valid and obligatory until the judgment of forfeiture is finally pronounced. Such judgement will not have a retrospective operation... But it will have the effect of preventing the Bank suing in its Corporate name... The judgment operating only for the future all prior acts of the Bank will remain valid." During the great Panic of 1837, most or all banks had insufficient specie to redeem the paper notes which they had issued as currency. On 10 May 1837, banks in New York City, for example, suspended specie payments, meaning that they would no longer redeem commercial paper in specie at full face value. In the spring of 1837 all banks in New Jersey suspended specie payments, resulting in much financial distress for civilians, and in some cases bankruptcy. An act of the Legislature of New Jersey was passed on 11 November 1837, only a few months after this discourse was made, to investigate all banks in the State, titled "An Act to provide for an investigation of the condition of the banks in this state and for other purposes." Other States had similar Acts in place. Following these investigations, the Financial Register of the United States reported that the twelve banks of the State of New Jersey held a combined aggregate of $217,178.71 in specie (actual gold or silver coins), and combined liabilities of $1,137,117.73 in various forms.] As predicted in Halsted's "Opinion" discourse, by a vote of 32 to 17, the New Jersey House of Assembly passed a bill relieving the banks from a forfeiture of their charters, despite not redeeming their notes in specie. As in the examples above, Halsted quotes relevant pronouncements of Chancellor Isaac Halstead Williamson of New Jersey, Chancellor James Kent of New York City, and late Chief Justice Theophilus Parsons of Massachusetts. Isaac Halstead Williamson (1767-1844) was an American politician who served as the eighth Governor of New Jersey from 1817 to 1829. As part of his duties as governor, he served as the judge of the Prerogative Court of New Jersey. He was subsequently Mayor of Elizabethtown, New Jersey, from 1830 to 1833. At the same time, in 1831 and 1832, he was elected to represent Essex County as a member of the New Jersey Legislative Council (now known as the New Jersey State Senate). Despite holding these political offices Williamson continued to practice law. In 1844, he was unanimously elected to be President of the convention that framed the revised New Jersey State Constitution. However, his poor health prevented him from fulfilling this role, and the same year he died. James Kent (1763-1847) was a jurist whose decisions and written commentaries shaped the inchoate common law in the formative years of the United States, and also influenced jurisprudence in England and other common-law countries. He became a justice of the New York Supreme Court in 1798, chief justice of that tribunal in 1804. Serving as chancellor of the New York Court of Chancery (then the highest judicial office in New York) from 1814 to 1823, he is said to have made equity jurisprudence effective for the first time in U.S. legal history. As professor at law, judge and commentator, Kent relied as much as possible on the old English law. Theophilus Parsons (1750-1813) was an American jurist. He served as Chief Justice of the Supreme Judicial Court of Massachusetts from 1806 until his death in Boston in 1813. In politics, he was active as one of the Federalist leaders in the state. Parsons was a member of the state constitutional convention of 1779-1780 and one of the committee of twenty-six who drafted the constitution. He was also a delegate to the state convention of 1788 which ratified the Federal Constitution. According to tradition, he was the author of the famous Conciliatory Resolutions, or proposed amendments to the constitution, which did much to win over Samuel Adams and John Hancock to ratification. His Commentaries on the Laws of the United States (1836) contains some of his more important legal opinions. All three of these men were held in the highest regard, often summoned and respected for their legal opinions. The Mechanics' and Manufacturers' Bank in Trenton was founded in 1834. Situated on the southwest corner of King (now Warren) Street and Second (now State) Street, it replaced the handsome and iconic eighteenth-century home of John Dagworthy which was demolished to erect the bank. It was in the stately home, two years earlier on 23 December 1832, that a large assembly of citizens was held to petition the Legislature for the chartering of the Mechanics and Manufacturers Bank. On 10 January of the year following, a bill was introduced in the House of General Assembly to incorporate the Mechanics and Manufacturers Banking and Insurance Company of Trenton. The bank petition was defeated by the legislators late in the ensuing month. Demand for additional banking facilities continued, however, and during the summer which followed, petitions were circulated and signed in Trenton and its surroundings, "praying for the establishment of the Mechanics and Manufacturers Bank." These petitions were given to Edward S. McIlvaine and were presented to the House of Assembly on 23 October 1833, only to be denied once more on 22 January 1834. However, the opposition did not discourage the business and professional men of Trenton in favor of the Mechanics Bank, who immediately reassembled their forces to dispute the decision, the day after their bill was defeated. It is interesting to note, that the men chosen to appear before the House and ask for reconsideration of the charter measure, were the city's most eminent lawyers, General Samuel R. Hamilton and William Halsted who wrote the present document. These men of the Bar were reinforced by Charles Parker, state treasurer. The appeal had its result as the bill was reconsidered and next day was adopted by a vote of 33 to 16. The measure was then sent to the Senate where on Wednesday, February 19, 1834, it was adopted by a vote of 9 to 4, immediately becoming a law under the caption "An Act to Incorporate the Mechanics and Manufacturers Bank at Trenton." Finally, on 25 September 1834, the Mechanics and Manufacturers Bank was opened for business. Contemporary to the present document: In September 1836 the board decided to build on the corner of the property and contracted with Joseph Witherup for a two-story brick structure at a cost of $3,500. William Grant, who became president in April 1837, supervised the project. Just previous to the decision to build the new bank the people of Trenton experienced a period of unusual prosperity. As one writer put it, "substantial and elegant buildings were going up in all parts of the city," with "seven factories in full operation and two other mills being built." Completion of the bank, unfortunately, was followed by a season of much financial distress and specie payment was suspended all over the country. The stability of the Mechanics Bank and the good work of its officers and directors was apparent, according to contemporary sources, for the State Gazette of 22 December 1837 made this comment, following the publication of a detailed banking statement: "The condition of The Mechanics Bank is now before the Community and it is proved to be worthy of great confidence." The Mechanics and Manufacturers Bank in Trenton would survive the ensuing period of economic depression which struck the whole nation, and continue operating until 1919.
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