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Jonathan W. Nesmith v. Thomas C. Sheldon
Citations: 47 U.S. 41; 12 L. Ed. 335; 6 How. 41; 1848 U.S. LEXIS 295
Court: Supreme Court of the United States; January 11, 1848; Federal Supreme Court; Federal Appellate Court
The case involves Jonathan W. Nesmith and Thomas Nesmith as complainants against several defendants associated with the Detroit City Bank, which became insolvent after drawing a bill of exchange for $600 in 1838. The Michigan Constitution mandates that no act of incorporation can occur without a two-thirds majority in each House. The Detroit City Bank was established under a legislative act from 1837, but the legality of this act and its amendments is contested. The Nesmiths obtained judgments against the bank and its directors but were unable to collect, prompting them to seek individual liability from the stockholders of the bank in equity court. Key issues presented by the complainants include whether the banking associations formed under the legislative acts are considered corporations under the Michigan Constitution, the validity of those acts, and the liability of stockholders for the bank's debts. The defendants argue that the Michigan Supreme Court has ruled the acts unconstitutional, thus invalidating any corporate status and precluding the existence of a corporate body under those acts. The Supreme Court determined that its jurisdiction would not extend to questioning the Supreme Court of the State's decision. It ruled that if the Detroit City Bank was not a legally recognized corporation, it would not be exempt from Michigan's unauthorized banking laws, rendering the complainants' claims illegal and non-recoverable. Consequently, any contracts made by the Detroit City Bank would be invalid if it lacked corporate status, implicating the defendants solely as general partners. If the defendants were deemed only general partners, any judgment against the directors would merge the claim, and legal remedies would be sufficient against them. Additionally, if the bank were found to be a valid corporation, the defendants argued that the complainants' claim was still illegal as it was not payable on demand. The defendants retain the right to contest the claim's validity despite a prior judgment against the bank. The Circuit Court judges had conflicting opinions on these matters, prompting the Supreme Court to order a certification of the case for further deliberation. However, the Supreme Court ultimately dismissed the case for lack of jurisdiction, referencing prior cases that established this precedent, and remanded the matter back to the Circuit Court for further proceedings.