cie payments by any person, association, or corporation issuing bank notes of any description.

[Const. 1846, art. 8, § 5.]

This subject has been treated in a former volume, under the head of "Banking and Currency," in connection with the work of the Convention of 1846.

§ 6. [Registry of bills and notes.]—The legislature shall provide by law for the registry of all bills or notes issued or put in circulation as money, and shall require ample security for the redemption of the same in specie.

[Const. 1846, art. 8, § 6.]

This section was one of the results of the financial agitation and business conditions which prevailed during several years prior to the Convention of 1846. That convention sought to prevent a repetition of those conditions by adopting a plan intended to protect the credit of the state and of its financial institutions. The subsequent national banking law, which, in effect, though not in terms, prohibits the issue of bills by state banks, has rendered this section temporarily dormant, but its efficacy would doubtless be revived if state banks should again issue bills to circulate as money.

This section is not self-executing, and in the absence of a statute requiring the redemption of bank notes in specie, such redemption may be in lawful money of the United States. Metropolitan Bank v. Van Dyck (1863) 27 N. Y. 400.

§ 7. [Liability of stockholders.]—The stockholders of every corporation and joint-stock association for banking purposes shall be individually responsible to the amount

of their respective share or shares of stock in any such corporation or association, for all its debts and liabilities of every kind.

[Const. 1846, art. 8, § 7.]

This section was originally adopted in 1846, but was modified in important particulars by the Convention of 1894.

The measure of the liability of stockholders prescribed by this section "is the amount, or, as it would be better expressed, a sum equal to the amount of their respective shares of stock." This additional security is necessary for the protection of the public. United States Trust Co. v. United States F. Ins. Co. (Empire City Bank) (1858) 18 N. Y. 199, citing Briggs v. Penniman (1826) 8 Cow. 387, 18 Am. Dec. 454; Bank of Poughkeepsie v. Ibbotson (1840) 24 Wend. 473.

This section applies to existing banks as well as to those organized after its adoption. Re Gibson (Oliver Lee & Co.'s Bank) (1860) 21 N. Y. 9. "The existing banks were numerous, and, if they were exempted from the principle of personal liability, it would be a long time before it would be generally established. By the general banking law the associations had the power to prescribe for themselves the duration of their corporate existence, and a long term had generally been named. Hence, if the rule of personal liability only reached the case of future banks, there would continue to be two classes of banking institutions for many years to come." The convention which framed the Constitution "was not obliged, like the legislative bodies, to look carefully to the preservation of vested rights. It was competent to deal, subject to ratification by the people, and to the Constitution of the Federal government, with all private and social rights, and with all the existing laws and institutions of the state." Affirmed as Sherman v. Smith (1861) 1 Black, 587, 17 L. ed. 163.

The section applies to banks chartered by special law. Re Reciprocity Bank (1860) 22 N. Y. 9.

The liability imposed by this section "is limited to stockholders in banking corporations or associations 'issuing bank notes or any kind of paper credits to circulate as money.' It is well known that state banks, while invested with the power of banks of issue on

complying with certain conditions, are, by the operation of the provisions of the United States laws relating to national banks, practically prohibited from the exercise of this power." The liability of stockholders in such banks is fixed by statute. Hirshfeld v. Bopp (1895) 145 N. Y. 84, 39 N. E. 817; Persons v. Gardner (1899) 42 App. Div. 490, 56 N. Y. Supp. 822, 59 N. Y. Supp. 463.

§ 8. [Preference of billholders. ]-In case of the insolvency of any bank or banking association, the billholders thereof shall be entitled to preference in payment over all other creditors of such bank or association.

[Const. 1846, art. 8, § 8.]

This is a part of the plan to protect the holders of bank bills, but is of little practical effect under present banking conditions.

§ 9. [ No state aid to individuals or corporations. ] Neither the credit nor the money of the state shall be given or loaned to or in aid of any association, corporation, or private undertaking. This section shall not, however, prevent the legislature from making such provision for the education and support of the blind, the deaf and dumb, and juvenile delinquents, as to it may seem proper. Nor shall it apply to any fund or property now held, or which may hereafter be held, by the state for educational purposes.

[Const. 1846, art. 7, § 9; Am. 1874; Const. 1894, art. 7, § 1.]

I have given in previous chapters a sketch of the conditions which led to the adoption of the policy indicated by this section. The first part of this section was adopted in 1846, and was then § 9 of article 7. It was modified in 1874 by striking out the word "individual" and substituting the words "private undertaking" in the first part, and by the addition of the second part, relating to

appropriations for charitable and educational purposes, and also making the prohibition applicable to the money of the state, which was not included in the original section.

By the act of 1840, chap. 193, the comptroller was authorized to loan to the Long Island Railroad Company $100,000 on "special certificates of stock," to be "reimbursable at the pleasure of the legislature, at any time after twenty years." The act of 1858, chap. 36, made the stock absolutely payable on the 1st of August, 1876, but authorized its redemption in 1861 on specified conditions, and also provided a sinking fund for the payment of the stock. The legislature had power thus to fix the date for the payment of the stock, and this was not a loan of the credit of the state. The loan had already been made under the act of 1840, and the Constitution of 1846 did not prevent the legislature from taking such steps as might be necessary to secure the payment of the loan. People ex rel. De Forest v. Denniston (1861) 23 N. Y. 247.

In People ex rel. Schenectady Astronomical Observatory v. Allen (1870) 42 N. Y. 404, the court denied the power of the legislature to authorize the comptroller to loan a portion of the principal of the common school fund for the purpose of establishing an astronomical observatory in Schenectady, chiefly for the reason that it would impair that fund, contrary to the provisions of article 9, 8 1, now, § 3. In the opinion the court say that "the legislature may donate any portion of the general fund of the state, or loan it upon any kind of security which it chooses, and such donation or loan will be valid, provided the act be framed and passed pursuant to the requirement of the Constitution." But the legislature cannot make a donation which would impair the capital of the common school fund, nor authorize a loan of it upon inadequate security.

The acts of 1866, chap. 576, 1867, chap. 708, and 1869, chap. 90, authorizing the North America Life Insurance Company to deposit with the superintendent of insurance securities for the protection of registered policy holders, and providing a special fund for the same purpose, did not constitute a loan of the credit of the state. The state "simply became the custodian of the securities deposited with it. It incurred or assumed no responsibility, except as a depositary." Atty. Gen. v. North America L. Ins. Co. (1880) 82 N. Y. 172.

The phrase "money of the state" means "money raised by general

taxation throughout the state, or revenues of the state, or moneys otherwise belonging in the state treasury or payable out of it.. and not money raised by ordinary local taxation for local purposes, and to be disbursed by the local authorities." The fact that money is raised by local taxation by the supervisors of a county, pursuant to an act of the legislature, does not make it money of the state. (Citing People v. Ingersoll [1874] 58 N. Y. 1, 17 Am. Rep. 178, and People v. Fields [1874] 58 N. Y. 491.) Construing together 88 9 and 10 (formerly 10 and 11), the court say that "the general scheme of the constitutional provision referred to seems to be that the general funds of the state shall not be given to local charitable institutions, except in aid of the blind, the deaf and dumb, and juvenile delinquents, and that the poor are to be provided for in their localities: counties, cities, towns, and villages being allowed to make any provision for the support of their poor which may be authorized by law. Carrying out the designated charities through the instrumentality of private corporations is not prohibited by the Constitution, but the giving away of the money, either of the state or of its counties or other local divisions, to individuals or private corporations, except for the designated purposes for which each is authorized to provide, is forbidden." The plaintiff was an institution authorized to receive and care for certain classes of children in New York, and therefore city money raised by taxation might lawfully be paid to it for such care. Shepherd's Fold v. New York (1884) 96 N. Y. 137.

What is the money of the state was considered in People ex rel. Einsfeld v. Murray (1896) 149 N. Y. 367, 375, 32 L. R. A. 344, 44 N. E. 146, where the court, construing the liquor tax law of 1896, providing for the distribution of excise moneys between the state and local communities, say: "There is a well-settled distinction between the money of the state and money levied under corporate powers conferred upon cities, villages, and towns for local and corporate purposes. In the latter case money levied and collected is not the money of the state. It is the money of the town, city, or village in which, under the exercise of corporate powers, it was levied and collected, and to it the state has no title."

The same court, in Fox v. Mohawk & H. R. Humane Soc. (1901) 165 N. Y. 517, 51 L. R. A. 681, 80 Am. St. Rep. 767, 59 N. E. 353, say that, from the enumeration in this article of the money "of the state, of a county, city, town, and village, it is plain that the Constitution meant to include all public moneys which are raised in any manner throughout the state as an exaction from the citizen by