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Mr. Norton. I imagine the gentleman is mistaken in the view which he takes of this section. He does not give it a fair interpretation. It does not say, nor does its meaning bear the iinport that corporations shall not be created by special act, except the Legislature see fit to create them. The section is plainly express. ed, and states what it means. Corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes, and in cases, where, in the judgment of the Legislature, the object of the corporations cannot be attained under general laws. If
, under this section, the Legislature grant a charter for a corporation by special act, where the object of the corporation can be attained under general laws, that act of the Legislature is unconstitutional. The question of constitutionality will be for the courts to decide. In regard to this whole subject of corporations, it was expected by the Committee that it would give rise to a good deal of discussion ; and knowing the opinions of the House respect. ing institutions of this kind, especially banking corporations, we endeavored to report such provisions as would cover the whole ground. With this view, the Committee selected from the different Constitutions such provisions as they deemed necessary to prohibit the Legislature from granting charters to banking corporations, or giving any corporations whatever the right to issue paper money, or any equivalent for a paper currency. Under these sections, nothing can cir. culate as money, except gold and silver. It was the opinion of the majority of the Committee, as it is of the majority of the House, that corporations for banking pur. poses should be prohibited. The substitute proposed for the different sections reported by the Committee, prohibits the creation of any corporation whatever, by special law, and also prohibits banking, and the issuing, and putting into circula. tion, any bills, checks, promissory notes, or paper to circulate as money. port of the Committee also prohibits banking corporations and the circulation of bank paper as a medium of currency; but the Legislature has power to grant charters for corporations when the object of such corporations cannot be attained under general law.
The only difference between the two in effect is with regard to the liability of corporations. I am not tenacious myself about this article. Let it be worded as gentlemen think best. I go as far as any one in making corpora. tors liable for the debts of the corporations;, but inasmuch as the report of the Committee does not vary essentially from the substitute moved in its place, I hope the House will not reject the report, and adopt a substitute which does not mate. rially differ from it.
Mr. LIPPETT. I agree entirely with the view taken by my friend from San Joa. quin, (Mr. Jones,) that the clause of this section, which intends to limit the Legis. lature, is perfectly nugatory, or will be so in effect. I am opposed to giving the Le. gislature the power, in any case, to pass special acts for corporations. For this reason alone, I should vote for the amendment. But even if I were in favor of granting such power to the Legislature in cases where the object of the corpora. tion could not be attained under general laws, I would object to the section as it now reads, on the grounds stated by the gentleman from San Joaquin-that the language of the clause makes the limitation perfectly nugatory. The Chairman of the Committee (Mr. Norton,) states that special acts passed by the Legislature where the object could be attained under general laws, would be unconstitutional, and that the courts would decide the question of constitutionality. I think not. If such a question were raised in any court of law, it could not be entertained. From the very reading of the clause, the question of constitutionality is left to the decis. ion of the Legislature itself. The Constitution, by leaving it to the discretion of the Legislature, settles the question; and it cannot be brought into court. If that clause was stricken out of the 31st section, so that it would read “Corporations may be formed under general laws, but shall not be created by special act, except for municipal purposes,” then it might be competent for a court of law to sit and hear arguments on the question ; but as it stands, the right to decide is taken out of the bands of the court. The very fact of the passage of the law, makes it conclusive that, in the judgment of the Legislature, the object of the corporation could not be attained otherwise than by special act.
Mr. Jones. I must say it is very difficult to discuss one part of this subject without going into a discussion of the whole. It is almost a matter of impossi. bility to state what effect that particular article will have, if we cannot discuss what effect the succeeding article is to produce. But, I am, as a general princi. ple, against the creation of corporations by special act. I think the power is al.' ways liable to be abused. I have seen a corporation under the name of the Sun Insurance Company, in New Orleans, for the sale of pork. You might with this authority, with all these prohibitions and constructions staring you in the face, in. corporate a body for the purpose of moulding tallow candles, and that corporation could next day issue bank notes. There is no prohibition here, as in the Consti. tution of Iowa, against the issuing any bill, ticket, check, or promisory note, to circulate as money. The only prohibition in all the articles reported by the Com. mittee is against the circulation of bank bills. A bank bill is a specific, deter. minate object. It is well known that a bank bill is not a check or certificate of deposite. Neither one of these would come under that definition. Suppose a corporation were to be created by special act for the purpose of moulding tallow candles, would it not be competent for that corporation to issue paper payable at par?
Mr. HALLECK. I call the gentleman's attention to another section, which says there shall be no corporations for banking purposes.
Mr. JONES. Does the gentleman call a tallow.candle corporation, a corporation for banking purposes ? They have a right to use their credit. A corporation for banking purposes is a well known object; that object is to discount paper, to re. ceive deposites and issue notes. But I presume any corporation has a right to issue its notes, or, if money be deposited in its hands, it has a right to issue cer. tificates of deposite. Now I wish to call the attention of the gentleman to the reading of this artile on banks: “The Legislature shall have no power to pass any act granting any charter for banking purposes; but associations may be form. ed under general laws for the deposite of gold and silver." This is the most im. perfect and objectionable bank I know of. If it has power to receive gold and silver, it has a right to issue certificates of deposite ; it has a right to make them payable to bearer, and consequently make them bank paper, and circulate them as money. The gentleman will certainly not deny that if i deposite the sum of one hundred dollars in one of these associations, I can take a certificate of deposite payable to bearer. None of the usual guards of the banking system are attached to this. You create here the most irresponsible sort of a bank. It is not neces. sary for such an establishment to bave capital in order to receive deposites. You do not compel it to have capital. It goes on and makes money on borrowed capi. tal. Such is the scope and inevitable result of any special act creating corpora. tions. If an individual has funds of his own to work upon, sufficient for his commercial and trading purposes, he does not want to work upon the capital of other people ; if he has not, I do not desire that the Legislature should give him the privilege of using other people's money. This question will come up more fully hereafter for argument. In relation to the 31st section, I contend that the objec. tions against it have not by any means been answered; that if you leave it entirely to the Legislature to determine upon the propriety of granting charters by special act, the rest of the section is nugatory and void ; there is no limitation'; and a general power is given to the Legislature to pass any special act it may think proper.
Mr. SHERWOOD. This section which it is proposed to strike out, was taken literally from the Constitution of New York. Previous to the adoption of that Constitution there were various projects for corporations before the Legislature every session ; sometimes as many as eight or ten for railroads, and sometimes two or three for the formation of Cemetery corporations or Insurance Companies. Many of these corporations were meritorious in their character and objects ; but the result was that half the time of the Legislature was occupied in examining their respective claims and granting charters. This had become an evil so great that it was at length deemed necessary by the people of the State, in Convention, to put a provision in the Constitution making it the duty of the Legislature to pass general laws, by complying with which, any association of individuals might form themselves into a corporation. There were other considerations that operated in bringing about this clause in the Constitution; the desire to extend to every one the privilege of forming associations for any beneficial purpose, whether by the combination of capital or otherwise, where the object could be attained under general law. It is necessary in certain cases that corporations should be passed by special act. They cannot be brought under a general head. There are in stances where but one corporation of the kind, for a charitable purpose, is offered to the Legislature. The subject may never come up again; hence the necessity of providing that, where the object cannot be accomplished by general law, special acts may be passed by the Legislature. What has been the experience of New York! The Legislature, in compliance with this provision of the Constitution, has passed a general law permitting railroad companies to be formed. In stead of numerous applications every winter for corporations, this great item of expense is cut short; and the general law is upon the statute book allowing any number of persons to form railroad associations, insurance companies, cemetery associations, or other corporations. This provision of the Constitution was com. plied with by the Legislature at the first session after its adoption. As occasion requires, where general laws could be passed, they have passed them-showing conclusively that they regard this clause as binding. The judgment of the people would be against them if they did not comply; their own oaths of office would be against them. I have heard no complaint, since the article was adopted, of the Legislature granting special charters where the object could be accomplished under general laws. It is not my design to discuss the questions embraced in the other sections, until we come to them in their proper order; but I think it clear that some discretion should be left to the Legislature to pass special grants of charter where the object is meritorious and cannot otherwise be obtained.
On motion, the Committee rose and reported progress.
AFTERNOON SESSION, 3 o'CLOCK, P. M.
Mr. JULIAN HANKS, a member from San Jose, came forward, took the oath, and was admitted to his seat.
On motion of Mr. Jones, the House then resolved itself into Committee of the Whole, Mr. Botts in the Chair, on the report of the Committee on the Constitu. tion, the question being on Mr. Gwin's amendment.
Mr. HALLECK. I have a very few words to say on this subject. I would call the attention of the House to one point. There are articles on the subject pro. posed in the amendment in the original report of the Committee. The gentle. man's minority report proposes to substitute several articles for one. I object to it on that ground. I also object to it on the ground that the articles reported by the majority of the Committee are far better, and the same object may be attained under one of the articles reported by the majority, and that is, to prohibit the cir. culation of any check, bill, promissory note, or paper. Why strike out one section of the report of the Committee, and then substitute for it an amendment which is afterwards carried in that report? It seems to me to be an unprecedented proceeding. It divides the whole subject. If it is possible to attain the object di. rectly, why not attain it directly, according to the rules of the House ? If we wish to limit the powers of the Legislature as is proposed in this substitute, let the question come under the proper section of the majority report—the section
This is proper
prohibiting the circulation of bank notes; and then if we choose, we can insert, as an amendment, all these prohibitions as to tickets, checks, bills, promissory notes, and other papers. I go for the report of the majority, because I think it infinitely superior to the sections, reported by the minority, in the definition and limitation of the powers of corporations.
Mr. SEMPLE. This is a subject upon which I have looked with a great deal of interest. I have been almost from boyhood opposed to every principle of banking. This settled conviction against the system has induced me to express my opinions freely to members out of the House ; and I am pleased to say I have not found a single member who, like myself, is not opposed to the banking principle. There is, therefore, no necessity for discussing this subject, or occupying our time in reiterating arguments which have so often been used before, and which have become established truths in political economy. I would much prefer, if the re. port of the Committee is not properly worded, or sufficiently guarded, taking it up on its own merits, and so amending it as to maķe it suit the wishes of the House. I can see no necessity for entertaining ourselves here making long speeches, when not one solitary member is in favor of the hanking system. The object of every member seems to be to avoid incorporating any privilege in this Constitu. tion for its establishment. There are some, I admit, who have but little knowl. edge of the baneful influence of this system, and who have not thought much upon the subject; but the general feeling is against it. Let us make the wording of the section as explicit as we deem necessary. I will read a portion of the 31st article, and give my views respecting it. "Corporations may be formed under general laws.'
No person can ohject to it. It is evident that corporations must be formed for certain purposes. The article continues" But shall not be created by special act, except for municipal purposes, and in cases where, in the opinion of the Legislature, the object cannot be attained under gene, ral law." Leave out a portion of this clause, and it will read: “Except for mu. nicipal purposes, in cases where the object cannot be attained under general law." This gives it a very different aspect. Are not all the objections of the most strenous opponents of the banking system answered by omitting this clause ?' I am satisfied there will be no difficulty in altering the report to meet the wishes of every gentleman on the floor. Either the report of the Committee, or the amend. ment of the gentleman from San Francisco, (Mr. Gwin,) will answer the purpose of a basis ; but as there seems to be a difficulty in getting at the latter, I propose that we shall take up the Committee report on its own merits. The main ques. tion is, can an association, under this article, go before the Legislature and get a special act for creating a bank of deposite ? This seems to be the point at issue. If the object which every member of the Convention desires, and which the people throught the country desire, is not accomplished by these words, the restrictions can be made more explicit.
Mr. JoNEs. I would suggest that the 2d section of the article in the Constitu, tion of Iowa, includes exactly the same subject as the 31st section of the report of the Commiitee. I moved it this morning, but withdrew it at the request of the gentleman from San Francisco, (Mr. Gwin.) I now move it again. It includes all that is in the report of the majority, and is much more to the point, viz:
Corporations shall not be created in this State by special laws, except for political and municipal purposes ; but the General Assembly shall provide, by general laws, for the organization of all other The stockholms shall be subject to such liabilities and restrictions as shall be provided by law.
. The State shall not, directly or indirectly, become a stockholder in any corporation.la
Mr. GILBERT. Do I understand the gentleman as proposing this as a substitute for the 31st section ? I think it can only be offered as a substitute for the substi. tute proposed by the gentleman from San Francisco, (Mr. Gwin.)
After some discussion as to the order of amendments, Mr. Jones withdrew his proposed amendment.
The question then recurring on Mr., Gwin's amendment, Mr. Price said :
There is no subject, Mr. Chairman, that has been, or can come, before this House, that has more importance or influence upon the future well-being of the State of California than this. Sir, it is pregnant with the greatest amount of good or evil. And if I have been desirous at any time to fasten my views upon this House, I am an hundred fold more desirous to convert those who hold different opinions from me on this subject ; for my mind was never 'more decided that we should prohibit the Legislature, by our Constitution, from creating, by general or special acts, corporations to carry on any species of banking.
The Constitution of the State of New York, from which the substance of the sections now under consideration is taken by the Committee, will not, I trust, be considered a guide to us.We are representing a country and people existing under very different circumstances from what the people of the State of New York were, when they made their revised Constitution. The people of that State sent their representatives in 1846, to revise and amend their old Constitution, which gave the most unrestrained power to their Legislature to charter banks, and these powers had been used to an unlimited extent. The number of banks existing in the State of New York at the time (1846) of the adoption of the banking system--which it is now proposed by your Committee to engraft on the Constitution which we are forming for the future State of Californiawas very great, I believe some hundreds. I have no statistics to give me the exact number, but the amount of bank notes in circulation at the time is stated to be about $105,000,000. Now, Sir, how very different are the circumstances under which we are assembled, representing as we do the people of a young and virgin territory, without banks, and whose great natural wealth is unparalled. Her very soil is abundant and prolific in the hard metallic currency, and is now daily adding three hundred thousand dollars to the positive wealth of the country and of the world. This gives us currency enough, and will more than pay for the supplies that are to be brought to us; and there is no occasion for us to resort to a fictitious currency, such as paper money, with its train of evils, as exhibited in the old States.
Sir, this is an original question with us. Let us appreciate our position, and act accordingly. The Convention of the State of New York in 1846, were not free to act upon this great principle. They were saddled with a banking system, which had the immense amount of $105,000,000 paper money in circulation, which it would have been ruinous to their citizens to have contracted or curtailed. They could not go as far as we can, although such was the desire expressed throughout the debate on this subject in that Convention. They meant to reform and restrict banking privileges by the general laws which they passed. But, I trust, sir, that the fact of these sections being found in the New York Constitution, or any other State Constitution, will have no influence here with us, who are dealing with this subject for the first time. It is most important that we start right. With the experience we all have, it surely will be our own fault if we do not start right
We are called upon, sir, and the people expect that this Convention will interpose its power as a shield to protect the commercial and laboring classes from the frauds and abuses resulting from the substitution of the credit and paper money of legalized banking associations, for the metallic currency of the world. The people of California want no extraordinary privileges, they only ask for a sound currency
--a currency produced from their soil- to secure the stability of trade. Let us provide then the strongest constitutional guards against the vicissitudes which we know the people of the United States have suffered. Ay, sir, and this is the time and place to cut off the head of this monster serpent, paper money, which, I fear, may creep in and sting us, if we adopt the report of the Committee. Our enlightened knowledge on this subject makes us unanimous in the opinion that no bank charters, no paper money, either of individuals or corporations, ought to circulate as currency. It is only for us to consider whether the sections reported by the Committee permit, by their general provisions, the Legislature to incorporate any association that may, hereafter, put in circulation paper money. I am afraid, sir, that by the section such a construction might be given. The associations authorized to receive deposites of gold and silver must issue certificates of deposit, and these certificates might be made a currency. At any rate, it might be attempted and supported by the many ingenious lawyers we have among us. Sir, it is upon this ground that I oppose this section; it behooves us to act on this subject distinctly and emphatically, and leave no room for misconstruction. Let us say what we mean, that corporations shall never be chartered by the Legislature with banking privileges, such as receiving or holding gold or silver on deposite. I go for the strongest and fullest restrictions ; and I believe I am acting understandingly. We have the wisdom and experience of the old States of the Union to direct us in steering our bark of State clear of the shoals and breakers that have created such wonderful commercial revolutions in the different States.
This question, sir, is one of great importance, not only to ourselves, but to the whole Union, owing to our circumstances, position, and commercial relations-foreign and domestic. Our commercial capital, San Francisco, is, in my opinion, destined to be the centre of the exchanges of the world, and is destined to supply the world with a large share of its currency.
With our great natural wealth, we can never want currency. We will soon have a mint; let us not, then, allow