ANSWER
OF THE
PRESIDENT AND DIRECTORS
OF THE
UNION BANK
OF
THE STATE OF TENNESSEE,
TO A
RESOLUTION OF THE GENERAL ASSEMBLY,
OF THE
27TH SEPTEMBER, 1833.
PRINTED BY ORDER OP THE HOUSE OP REPRESENTATIVES.
NASHVILLE:
RESOLUTION.
The following joint resolution, of the Senate and House of
Representatives of the General Assembly of the State of Ten¬
nessee, was transmitted to the President and Directors of the
Union Bank of the State of Tennessee, on the 27th September,
1833.
Resolved,, That the President and Directors of the Union Bank
of Tennessee report.to the General Assembly, if they conceive
that they are authorized, by the 7th section of the act of incor¬
poration, to retain in their possession the profits arising on the
stock owned by the State, until the State bonds shall have been
paid, and what construction they have given said 7th section of
said act of incorporation.
| H IS TO.RICA L )!
ANSWER.\^cimy
Union Bank of the State of Tennessee,)
October 5, 1833.5
To the honourable the General Assembly of the State
of Tennessee.
Gentlemen—The undersigned, President of the U-
nion Bank of the State of Tennessee, has the honor to
acknowledge the receipt of your joint resolution, under
date of the 27th ult. which was immediately submitted
to the board of Directors for their consideration, who
directed me to make the following answer thereto:
The board of Directors understand the resolution to
require information upon two points: 1st. What con¬
struction the officers of the Bank may have heretofore
given to the 7th section of the charter of incorporation;
and 2d. Whether the board would conceive themselves
authorized to retain in their possession the profits aris¬
ing from the stock owned by the State until the State
bonds shall have been paid. Upon the first point as
above stated, the undersigned begs leave to inform your
honorable body, that the officers of the Bank have not
as yet had occasion to give any official construction to
the section referred to in the resolution, nor do they be¬
lieve it will become necessary for them to take any ac¬
tion upon that section during their continuance in office.
It might therefore seem to be an act of supererogation
upon their part to give any opinion in advance upon the
subject; but rather leave the question open and unem¬
barrassed by discussion to the judgment of their succes¬
sors, when profits shall have accumulated on behalf
of the State, and appropriate proceedings shall have
4
been adopted to present that question. The under¬
signed would beg leave to remark, that the officers of
the Bank have not the vanity to suppose, that their opin¬
ion could, or ought ta.have any great weight with your
honourable body in determining a legal question; and,
therefore, would have willingly declined presenting
their views upon a subject on which none of them may
be called upon to act officially. However, under the
influence of the high respect they entertain for your
honourable body, considering the large interest held by
the State in the Institution, and with the belief that
some useful end is intended to be accomplished by ob¬
taining the information requested (although not percei¬
ved by them,) the board have deemed it their duty to
present their impressions in obedience to the require¬
ments of the resolution.
The undersigned, therefore, in reply to the resolution
of your honourable body, has the honor to state, as the
unanimous opinion of the President and Directors of
the Union Bank of the State of Tennessee, that they
consider themselves not only authorized, but that it is
their duty to retain upon deposit in the Bank the profits
arising from the stock owned by the State, the bonus to
be paid by stockholders other than the State, and any
interest which may accrue upon the Treasurers' deposits
under the charter, until the bonds of the State shall
have been paid.
In presenting an opinion upon this subject, it is doubt¬
less expected by your honourable body, that the promi¬
nent considerations upon which its correctness is sup¬
posed to depend, should accompany the opinion. The
undersigned, therefore, as the presiding officer of the
board, will attempt to comply as briefly as possible with
that expectation. And with a view to perspicuity, the
subjects will be considered in the following order:
I. As to the authority of the Bank to retain the
profits until the bonds shall have been paid; and
II. As to the duty of the Directors to keep it in their
possession until that event takes place.
1. The first proposition then to be maintained, is the
5
authority of the Bank to retain the profits upon the
State stock;—the bonus agreed to be paid for the pri¬
vileges of the charter and the interest upon the Trea¬
surers' deposits.
In support of the above proposition, permit me to ask
the particular attention of your honourable body, to the
enactments of the 7th section referred to in your reso¬
lution. It is in these words:
"Be it enacted, that the profits which may arise from
the stock owned by the State in the Union Bank of the
State of Tennessee, after the bonds of the State shall
have been paid, and also the bonus agreed to be paid
by the Bank to the State, for the privileges conferred
by this charter, and also the interest which may from
time to time accrue upon the deposits of the public mo¬
ney by the Treasurers of the State, shall be, and they
are hereby appropriated to the use of common schools,
&c."
In the first place, I will make a few remarks, with
the view of showing that the profits upon the stock, the
bonus and the interest upon the Treasurers' deposits,
stand precisely in the same predicament, and are sub¬
ject to the same destiny, whatever that may be. The
phraseology of our statutes very frequently, by the re¬
fined scholar, may be considered awkward or of doubt¬
ful meaning, arising from the practice of amending
bills upon the floor of the House upon their last read¬
ing, and perhaps this section may be subject to that
sentence of condemnation. Yet, the meaning of the
Legislature is clear, and the expressions substantially
accurate. The two latter items of profit are joined to
the first by the conjunction and, the adverb also is su¬
peradded to designate distinctly, that they are placed
upon the same footing in all respects with the matter or
subject to which it is connected. This adverb is a com¬
pound of the words all and so, and signifies literally in
the same, or like manner. Crabbe, who is considered
of the highest authority in matters of this kind, says,
"that this word is more comprehensive than likewise,
and implies a sameness in the whole." It is therefore
6
perfectly clear that the whole three items of profit
mentioned in this section are, and were intended to be
placed upon the same footing, subject to the same uses,
and must share the same destiny in despite of even ver¬
bal criticism. When we look at the latter and appro¬
priating clause of the section, it seems not to be a de-
bateable question; they are all appropriated as a joint
fund for the promotion of a given object.
Having shown, as it is believed, that all the funds
mentioned in this discussion and embraced in the sec¬
tion referred to, are placed in the same predicament,
the question then recurs, has this fund been directed by
the Legislature to be placed upon deposit in the Bank,
as it may accumulate, to constitute a sinking fund to ex¬
tinguish the bonds of the State, or was it the meaning
of that body to withdraw it from time to time as appa¬
rent profits might be shown, and use it for other pur¬
poses? The latter construction can only prevail by
either striking out the words, "after the bonds of the
State shall have been paid," in the reading of the sec¬
tion, ("for upon them hangs the law" of the section,)
or consider them as having no meaning, which I know
none of your honourable body would be willing to do.
Nor do I believe any lawyer or judge could be found
bold enough, no matter how much he might desire it, to
do such violence to the voice of a free people, thus sol¬
emnly expressed by their Representatives upon an im¬
portant matter, affecting essentially their interest and
character. Again: The section speaks of profits to be
ascertained at a particular time. If the question is ask¬
ed, when is that time? the answer is given by the
Legislature, "after the bonds of the State shall have
been paid." Those who know any thing of Banking
operations, will very readily comprehend that what
might appear to be profits upon the books at the end of
the first five years, or any other given period, from ad¬
verse circumstances and bad management, might all be
consumed, and a large charge upon the other side of
the ledger. Very few Banks have been able always to
afford profits. The Bank of the United States, with all
7
its immense credit, through indiscreet management dur¬
ing the administration of its first President, was found
to be without profits for several years. The fact is,
whether there will be profits, and to what amount upon
the stock of the State, is a matter about which we may
speculate; but, it cannot be ascertained until the inter¬
est and principal of the State debt is paid. And it is
very evident that the Legislature so understood this
subject, and therefore fixed the period at which these
profits are to be ascertained and appropriated "after the
bonds of the State shall have been paid."
Independent of the express provision that these funds
shall be retained to meet the State bonds, for such it is
insisted is the fact, there are other considerations con¬
nected with this subject, which ought to have a controling
influence in arriving at the same conclusion, was the
section of doubtful import upon its face. Some of
them I must be permitted here to mention to your hon¬
ourable body. It will be seen by those who choose to
examine the journals of the House of Representatives
of the 20th October, 1832, that after this charter had
been passed in its present form, a motion was made by
Mr. Brown, to reconsider the 7th section, for that is the
way it is there stated, which motion prevailed. The
same member then moved to amend said section by in¬
serting between the words the and bonds, "accruing
interest on the," which was adopted by the House.—
The section then read, "after the accruing interest up¬
on the bonds of the State shall have been paid;" there¬
by expressing the idea distinctly, that whatever might
be over and above the payment of interest upon the
bonds half yearly, was subject to be withdrawn, at any
time. But Mr. Gillespie made a motion to reconsider
the vote adopting the amendment. Considerable dis¬
cussion took place, and some individual warmth, as I
have been informed. TJJie vote was reconsidered, and
Mr. Brown withdrew his amendment under the convic¬
tion that it was wrong. This left the bill in its original
shape. Mr. Kincaid then moved to reconsider the vote
passing the bill, with the view, if the House would not
8
alter that section, so as to withdraw these funds before
the bonds should be paid, to endeavour to have it re¬
jected ; and this motion was refused by a vote of 28 to
11. This shows most conclusively, that the Legislature
who passed the law, intended that the fund should be
retained in the Bank, to be applied to the extinguish¬
ment of the bonds, and that they thought at least, that
they had expressed it with sufficient certainty.
Again: In the construction of the acts of the Legisla¬
ture, it is proper to look at the whole instrument, the
subject matter, and the objects intended to be provided
for. Under the influence of this rule, (which is but the
rule of common sense,) let us examine this subject.
By the preceding section of this charter, the Legisla¬
ture authorize and direct the Governor to make and ex¬
ecute bonds to the amount of $500,000, bearing 5 per
cent interest,- payable half yearly, and the whole to be¬
come due and payable in 15, 20, 25 and 30 years.—
These bonds were to be made payable to the Union
Bank, and to be delivered over to the officers of the
Bank in full payment for that amount of Bank stock.
The interest to be paid upon those bonds amounts to
$522,500;—making in all a debt of $1,022,500. Would
it not be a great imputation against the wisdom of your
predecessors, to suppose for one moment, that they had
made no provision for the payment of this large debt?
And would not a more serious charge, I mean that of a
want of honesty, be well maintained against any legis¬
lative body, who would direct the Governor to execute
the obligations of the State to pay money, $12,500 of
which would fall due and be payable before another
meeting of the General Assembly could or would take
place, and then adjourn without making any provision
to meet the payment? And this is the dilemma in
which your honourable predecessors will be placed, if
the construction of the 7th section of the charter, which
we insist upon, shall not prevail; for there is no other
provision in the whole instrument for the payment eith¬
er of principal or interest.
All the Governments of which we have any knowl-
9
edge, who have created public stocks, have uniformly,
at the same time, made provision for their redemption.
Those who have had occasion to examine the subject,
will remember, that England, who has created more
stock than all the rest of the world added together, al¬
ways hypothecates some particular branch of her re¬
venue at the same time, as a sinking fund, or at least,
to pay the interest upon such debt. In revolutionary
France, when the fixtures of government were torn
from their foundation, when the elements of society
were in fearful commotion, the streams of religion poi¬
soned in their very sources, when professed patriots held
themselves freed from the influence of moral obliga¬
tion—even then, with the talented but profligate and
reckless Mirabeau at the head of the dominant party,
the national assembly, in creating their 40,000,000 of
assignats, at the same time provided for their redemp¬
tion by the sale of the confiscated property of the
church, thereby keeping up the appearance, at least, of
wisdom and honor.
Tennessee, at this early period of her political exis¬
tence, has attained a proud eminence among her sister
States, not only for her daring in the field, but for her
wisdom and integrity in the civil concerns of govern¬
ment. Her virgin honor, until this time, has remained
unsullied; and it is upon this account, that her citizens
when they travel abroad, like the Romans of old, are
proud to acknowledge the place of their residence and
home. I would, therefore, ask, if there are any among
us who are willing to submit to the mortification of ac¬
knowledging that this elevated character of the State,
has been tarnished either by the folly of the Legislature
in making promises to pay such large sums of money,
without provision to redeem those promises in good
faith, or from the criminal intention of deceiving those
who become the holders of their obligations? I can
answer for every genuine Tennessean in the negative.
There are none, no not one, who would willingly sub¬
mit to this degradation. I am persuaded that the peo¬
ple of Tennessee are proud of the elevated character
B
10
of the State, and a loss of that character would be felt
by the most humble member of the body politic, as a
mortification and grievance somewhat personal; as the
pain from a perforated artery vibrates to the remotest
extremity of the natural body, in like manner, a wound
inflicted upon the honor of the State, would be felt with
sensibility throughout the members of the body politic.
Let these remarks suffice upon the question of authori¬
ty to retain the fund, and it is hoped that all will be not
only satisfied of the correctness of the opinion advan¬
ced by the board, but that it has for its foundation the
strictest rules of honesty and propriety.
II. The second point of view on which it was pro¬
posed to consider this subject, is, as to the duty of the
officers of the Bank to retain this fund.
The Directors of the Bank consider themselves pla¬
ced in the attitude or character of Trustees, in the man¬
agement of the concerns of the Institution, and ac¬
countable for the performance of that trust to all par¬
ties concerned in the faithful execution of their duty.—
Firmly impressed then, as they are, with the correctness
of the opinion that this fund has been placed in their
hands to meet the debt of the State, it follows as a ne¬
cessary and natural consequence, that they are under a
moral obligation to see that it is preserved to meet the
objects for which it has been appropriated. The par¬
ties now concerned and interested in this matter, are
the citizens of Tennessee, the individual stockholders,
and the holders of the bonds of the State.
1st. Then, it is conceived that the board are in duty
bound to the State or the citizens of Tennessee to pre¬
serve this fund to meet the payment of the principal and
interest upon the State bonds. This course will pre¬
vent the possibility of a failure from tardy legislation,
or any other cause of jeopardizing the honor of the
State, by having a fund always at hand to meet the
debt. This will avoid what would be conceded by all
to be a serious calamity upon the people of this State, of
raising this large debt by taxation. Our taxes heretofore
have been but a trifle, our government expenses have
11
been marked by the strictest economy. But should the
officers of the Bank prove recreant to their duty, and
permit this fund to be withdrawn and squandered upon
other objects, and $1,022,500 should have to be raised
by taxation, the people would have just cause to com¬
plain of all concerned in this oppression, and would
hold them in just execration. Again: This fund, after
the bonds of the State shall have been paid, has been
set apart by the Legislature for the promotion of educa¬
tion; and the board would consider themselves acting
faithlessly towards their childrens' children, should they
willingly permit it to be withdrawn and diverted from
that sacred destination. I will take the liberty here to
express my admiration of the wisdom of the last Gen¬
eral Assembly, as displayed in this measure: they de¬
serve in my estimation unmeasured praise. They cre¬
ated a debt of $500,000, redeemable in thirty years—
they provided for its extinguishment constantly and cer¬
tainly, without expense or trouble to the citizens of the
State, by placing the profits in the Bank as a sinking
fund for that purpose. The profit, after all has been paid,
may be reasonably calculated to amount to $1,000,000,
which profit they have devoted to the laudable object
of affording the means of education to the poor as well
as to the rich. I consider their wisdom has been parti¬
cularly displayed in reserving the sum until the whole
has been accumulated. For if it was withdrawn an¬
nually, no useful end could be attained by such small
sums; whereas, by waiting until the expiration of the
charter for its actual distribution, it will go far towards
establishing a general system of Common Schools
throughout the State. The sum will then be too large
to be squandered thoughtlessly, and the experience and
intelligence of the State will be, it is hoped and believ¬
ed, much enlarged; thereby furnishing an additional
guarantee that it will be used with discretion.
2d. Having said this much to show that our duty to
the State requires us to preserve this fund, I shall pro¬
ceed, secondly, to submit a few remarks to show that we
are boqnd in duty to the stockholders to retain it.
12
We consider that the stockholders have a right to
look to us for the preservation of this fund. The Bank
has sold the bonds under the provisions of the charter,
and guaranteed the payment of the principal and inter¬
est by endorsement, and therefore are bound in honor
and law to pay both as they fall due. Suppose then the
Directors were to permit the funds to be withdrawn,
and by possibility the Legislature were to fail to raise
the necessary funds from other sources to meet the debt,
the Bank would be compelled to make the payments,
and await the pleasure of the Government to repay it.
For although the Government would be in honor bound
to repay, yet there is no law authorizing a suit against
the State to enforce their obligation, and consequently a
serious injury might result to the stockholders. When
this charter was first published in the Banner, through
mistake, the words "after the bonds of the State shall
have been paid," were omitted, and in this shape it was
transmitted to Eastern capitalists to solicit subscription
for the stock, but their objections were pointed to this
very defect in the charter. There was no provision
for the payment of interest upon the State bonds, nor
for the payment of the bonds themselves. The bonus
or tax of $10,000 per annum, was unusually large, was
their reasoning upon the subject; but when it was as¬
certained that the charter itself contained the provh
sion, orders were immediately given for more than half
the stock from the eastward, under the belief that this
fund was to be placed in the Bank to meet the bonds,
and any profits that might be made in the mean time
upon that fund, whilst it remained in Bank, in part
would go to individual stockholders, and would neutral¬
ize the oppressive tax of ten thousand dollars per an¬
num. This was the understanding of stockholders,
when they subscribed; and should the Directors fail to
resist a different construction, they would be justly
chargeable with a criminal dereliction of duty.
3d. In the third and last place, the Directors owe it
to the holders of the State bonds, to resist the with'
drawal of these funds from the Bank,
13
The undersigned would beg leave to remark, that the
bonds of the State were sold under a full examination
of the charter, and with particular reference to the 7th
section, by him and the honorable gentlemen who pur¬
chased. He was able to urge the argument, as he
then, and now believes with sincerity and truth, that
the stock was more valuable than ordinary stock bear¬
ing the same rate of interest, for the reason that here
the purchaser would have the guarantee and punctuali¬
ty of a Bank, with the funds provided and placed in
their possession to meet both principal and interest, and
that Legislative action would not be necessary in fu¬
ture upon the subject; that most of other stocks were
based upon unsold lands or the ordinary revenue, &c.,
and in general other and further legislation might be
required. This he considered a conclusive answer to
that suspicion entertained by dealers in stock to the
eastward against western and southern credit, arising
from what they call instability of legislation. This
objection we who live here know is not entitled to as
much credit as is given to it abroad, yet the undersign¬
ed was proud to have it in his power to meet the suspi¬
cion and put it to silence, from the provisions of the
charter itself. The bonds were therefore sold under
this construction of the charter. The purchasers ad¬
vanced their money with this understanding, and hon¬
esty, good faith and duty, all require that the holders of
the bonds should not be deceived in this respect.
Again: The purchasers of these bonds might and in¬
deed would be seriously injured, by the construction
that the funds could be withdrawn from the Bank. For
they"too will wish to put them into market, in London,
perhaps; and if it should be determined that this fund
could be withdrawn from the Bank, upon which much
of their credit with capitalists depends, the value of the
stock would immediately depreciate, and the bond hol¬
ders deceived very much to their injury. The under¬
signed feels, and will therefore take the liberty of ex¬
pressing it in conclusion, that the honor of the State—
the credit of the Bank and its successful operations, the
14
interests of the State, the cause of education, the inter¬
est of the stockholders, the interest of the holders of
the bonds, and his own personal honor, are deeply in¬
volved in this matter. The latter he admits is a mere
private concern; but as the undersigned has been the
agent in the sale of the bonds, he cannot but feel some¬
thing more than a common solicitude that the views
which he had entertained and honestly presented to the
honorable gentlemen with whom he negotiated, shall
be deemed correct, and affirmed by the intelligent part
of society.
All of which is respectfully submitted.
G. W. GIBBS,
President of the Union Bank.
&
J