The worry, wear and tear of attending to a lawsuit in the capacity of either plaintiff or defendant is perfectly incomprehensible to those who have never passed through the trying ordeal. A person in either capacity, with his train of witnesses, is obliged to dance attendance on court every day, no matter how pressing the necessities of his own business may be. Books must be carried thither, and all his establishment must be upset for the convenience of the court and to gratify the whims and caprices of the opposing litigant. The business places of the two contending parties are entirely disarranged, and the help thrown into a state of partial disorganization. Each party to the suit seeks to give the other all the trouble he possibly can, and to subject him to all the sources of annoyance his imagination can devise. Such is the spirit imbued by going to law.
A lawyer, therefore, who has about half a dozen moderate cases has thus his entire time occupied, and while his clients keep out of bankruptcy his income is as good as the annuity of a life insurance company, and frequently the security is better.
The effect of the change which I propose, in the majority of cases where merchants and business men find it necessary now to resort to legal methods, would perhaps not render the life of the ordinary lawyer so happy as it is under the present system, but the merchants would gain ten-fold more than the lawyers would lose, so the effect upon the entire community would be incalculably beneficial.
The system of arbitration which I contemplate could be extended in every line of business throughout the entire country, with a Central Association in New York or any other city that might be agreed upon. In fact, there might be several business centres, one in each important city, with its ramifications extending throughout the section in which its commercial interests more immediately clustered. Branch associations could be organized in the smaller cities and towns, enjoying all the facilities of direct communication with the central body, and availing themselves of all the information and statistics there collected, and the nature of decisions in special and leading cases of settlement.
Each association in its own city or town should be considered fully competent to deal with its own affairs, the Central Association being only consulted as an advisory body. I should recommend also that each association should have a governing committee, which should constitute its Court of Appeal, whose decision should be deemed final.
It would hardly be necessary to prescribe penalties for the few isolated cases that would kick against the arbitration system, and resort to law, as their legal experience before they got through would be punishment sufficient without the association taking any further action. Discipline, however, of a mild character, would have to be enforced in these and other special cases, for the better efficiency of organization.
It might be well to have a rule whereby the parties submitting their cases to arbitration should recognize the necessity, after having the methods of procedure thoroughly explained to them, of putting themselves under obligations to abide by the decision.
In carrying out a national idea of this kind of association, business could be greatly facilitated and much expense saved by the various committees having due regard to their places of meeting, so as to be as near as possible to the centre of the greater number of the witnesses in each particular case.
The courts, which are now greatly overworked, would be immensely relieved by this system, and they would have more time to sift important and exceptional cases which, in their nature, could not possibly be made subjects of arbitration. There are quite enough of such cases to occupy the time of the various courts.
One of the most vexatious and irritating things connected with court trials is the constant attendance required, even when no progress is being made in the case. The expenses, too, are always accumulating.
Though nothing is accomplished the attendance of the lawyers is far from being a labor of love. Their services must be handsomely rewarded by the litigants.
Such a process of settlement as I suggest would not, after all, be any great hardship to the best of the legal fraternity, as there would be enough work left for them, but it would afford immense relief to the now overworked judges, while it would facilitate and forward the ends of justice to an extent that can hardly be imagined by those who have been always accustomed to the slow and monotonous machinery of the law courts, and it would help to weed out the large camp following of pettifoggers, whose occupation would be partially gone.
There is a great deal of time lost in regular court business, causing much exasperation to the parties to a suit, in settling mere technicalities and side issues of law, before the real merits of the case can be reached. Many of these technical delays could be easily disposed of by business men, on business principles, and by taking a simple and common-sense view of the matter, by the usual methods pursued in arbitration.
This new method of settling disputes would do away with the farce of giving bonds in many cases, which is another great source of annoyance, and which, after all, only amounts to a mere formality in a large number of cases, and in many others a very hollow and fraudulent pretense, as many of the bondsmen are only men of straw, and though technically qualified, are not in reality responsible for the obligations undertaken by them.
When good, reliable sureties are offered, in many instances they are put through an irritating course of examination in relation to their private affairs, much of which is entirely unnecessary, and only designed to perplex and annoy them. They are thus obliged to expose matters relating to their private business, about which the public have no right to know anything, and they are often examined in such a way, as if they themselves were on trial, and were attempting criminal concealment of something that they had a right to disclose. A good deal of this arises from the impudent, unmannerly style of certain lawyers, who treat a man as a criminal suspect, when he has no interest in the case whatever, but has simply come voluntarily forward to assist a friend in trouble.
This is all, however, in the present method of procedure, connected with the machinery of so-called justice, and this kind of abuse has been carried to such an extent in some of the instances just referred to, that very few responsible parties, who know anything about the _modus operandi_ of qualifying as a surety, are willing to respond to such calls of friendship. Hence, one of the difficulties in obtaining good bondsmen, and an additional reason why the professional straw men are so plentiful.
It probably helps the business of the latter, between whom and the abusive lawyers there may be an understanding on “boodle” principles.
I shall relate an instance which I consider worthy of permanent record illustrative of the matters to which I here refer, in which my firm was victimized.
On the occasion referred to, my firm sued a client for a just debt of sixteen thousand dollars. The case was sent to a referee, whose standing, in his particular line, was unquestioned at the time, and very few men, in his circle, had better family connections. He stood high in his profession and both sideS were satisfied with the choice. The case was very long and tedious, having been drawn out to a most provoking extent by encumbering the record with immense piles of irrelevant matter. The renewed calls for legal fees on both sides were numerous and vexatious, yet there was no help but graceful submission to the payment of this tribute.
After a number of years it was reluctantly conceded by the lawyers that the evidence was all in on both sides. The litigants breathed heavy and responsive sighs of relief, each side being confident of victory.
A short time prior to the close of the case, the referee spoke to me, gratuitously offering his advice to settle the case, as he said he intended to give a decision adverse to my firm. To this I demurred, and expressed my determination to fight the case to the bitter end.
The result was, however, that my firm not only did not get a decision in its favor for the $16,000 to which it was justly entitled, but this claim was wiped out by this Daniel come to judgment, who gave a decision in favor of the defendant for $132,000.
I regarded this award as such a terrible outrage upon justice that I obtained a stay of proceedings, and made an appeal, setting forth therein the advice given to me by the referee to settle before the case was closed.
Judge Fancher, who wrote the opinion on behalf of the bench, consigned that referee to everlasting disgrace, and set aside his opinion. There the case ended.
Another instance in my experience will illustrate the point which I have made in regard to the sympathy exhibited by juries with those whom they regard, rightly or wrongly, as oppressed. At one time I had employed a clerk at the rate of $2,000 per annum. He was a great disappointment to me in regard to competency, for the work for which I had engaged him, and for his entire lack of application to, as well as deficiency in, the department to which he was assigned. At the end of the first year, therefore, I gave him notice, in presence of two competent witnesses, that I should not require him after his year had expired, and advised him to look out at once for another situation. On the last day of the year he came to me with tears in his eyes and said that he had been unable to obtain another place, owing to the bad times prevailing, and begged me, in the name of his family, who was solely dependent upon him, to keep him in my services still longer, until he could get another situation. Purely out of sympathy for his condition, and believing his story, which was very plausible and pathetic, I told him that he might remain a short time longer on the same salary, but that I should require him to use all his exertions to get another place as speedily as possible.
When he entered on the second term his services were no more use to me than a fifth wheel is to a coach. After the expiration of a few weeks, I sent for him and inquired if he had got another situation; I said I had given him ample time to obtain one, and that I could not consent to keep him any longer. I therefore requested my cashier to draw a check to his order for the balance of his wages, up to date, filled in as a part of the body thereof with the words “payment in full for all claims and demands.”
Thereupon he left my employment, but called repeatedly at the office afterward. I assumed that his visits were simply for the purpose of paying his respects. At the expiration of the second year I received a notice of suit which he had commenced in Brooklyn for the balance of salary due him for the year, being at the rate of $2,000 a year for ten months.
The case came up duly in the Brooklyn court, his only witness being his father, who had made several calls upon me after the discharge of his son, on the strength of which he set forth, in his evidence, certain conferences that should have taken place between him and myself, the greater part of which were purely fictitious. He was the only witness called on the side of the plaintiff, while I had five or more witnesses to substantiate the facts, as I have related them, in relation to the young man’s discharge, all of them being of most excellent character.
Strange to say, the jury entirely ignored the overwhelming testimony on my side, and seemed to be altogether influenced by the “spread-eagle” address of the defendant’s counsel, which I am free to say was both able and ingenious. He drew a harassing picture of the poverty of the young man, and presented the imminent destitution of his family in a most pitiable light, brought about solely by the ruthless treatment of this hard-hearted millionaire and bloated bondholder. Hence the verdict was made, through the force of counsel’s oratory, to depend exclusively on the sympathy of the jury, irrespective of the evidence.
The case occupied several days, with five or six employees from my office in constant attendance, who were obliged to carry to and from court, every day, huge books and large quantities of papers, disturbing the regular business of the office in a very disagreeable manner.
After counsel had gone over the ordinary rigmarole in reviewing the testimony, the jury went through the formality of retiring, to keep up appearances, and after a brief interval of absence returned to court with a verdict for the deeply injured clerk for back pay, together with interest for the ten months during which he had not rendered me an hour’s service.
My lawyer was easily able to obtain fresh evidence from other sources, but he had not considered it necessary to put any more witnesses on the stand, as he had regarded the testimony already produced more than ample, so sanguine was he of success, and so fully satisfied of the plainness of his case, which he considered had only one side, and that in my favor.
The jury, however, put the boot on the other foot, upset all my counsel’s calculations and showed him that his law went for nothing where the famous twelve had the right to judge and legislate at the same time in accordance with their sympathies and prejudices. Still he went through the formality of going before the judge with new evidence, and applied for a new trial, which was ordered on the ground that the verdict was not in accordance with the weight of evidence.
The new case was called after the customary delays, and the same ground was duly traversed again, with my additional witnesses, before another highly intelligent jury, whose prejudices were all on the side of the greatly injured young man, who sought twelve months’ pay for two months’ useless services. The only witness that appeared again for the defendant was his faithful and veracious father, whose memory was marvellously correct in relation to his former statements on the first trial.
There is an old proverb which says that it requires such men to have good memories. I need not quote it, as almost everyone knows it.
To make a long story short, however, that forensic orator appeared again for his poverty-stricken client, armed with all the old enthusiasm exhibited on the former trial. He had not much new matter to present, but his dramatic attributes, by dint of longer practice, and more familiarity with his side of the case (it was only necessary for him to study the one side) had become considerably improved since his former effort, and it is needless to say that he carried the jury with him.
By that intelligent safeguard of our liberties, the jury, the second trial was only regarded as an aggravated case of persecution, on my part, and the verdict was given more cheerfully in favor of the plaintiff than on the former occasion.
Although it would have been much better for me, from a financial point of view, to have paid the amount of the exaction, with all the legal and illegal fees and impositions connected therewith, yet I felt disinclined to be bamboozled in that way.
When the court was applied to for another new trial, the judge said, “I have already given you one new trial, taking the responsibility. The relief you now ask has already been before two juries, and I am not willing to take upon me any additional responsibility in the matter. You must therefore look for any further rights or redress to which you may consider yourself entitled, to the Court of Appeals.”
The case is now, therefore, awaiting the good time and discretion of the Court of Appeals, where it will, in all probability, be heard and adjudicated upon sometime within the next ten years. In the meantime the young man is happy in the reflection that his judgment is a good investment, drawing six per cent. interest.
There is still another case illustrative of some of the peculiar points referred to, and showing the truth of the maxim among lawyers that, “You never know what a jury will do,” in which I had the honor, or the misfortune to be joined.
A well-known outside broker in Wall Street, who had a large experience in transacting business for Mr. Sage and other notabilities of the street, in “puts,” “calls,” and other exterior securities, came to me one afternoon and asked me if I didn’t want to buy a pair of diamond earrings.
At that time I had not begun my career as a dealer in diamonds, except in one solitary instance, and that was when I purchased the wedding ring, which is one of the requisites in a matrimonial contract for a long term. I was, therefore, comparatively a tyro in the business, and the party with whom I was dealing did not fail to take advantage of my inexperience. I made some inquiry about the diamonds from this broker, to which I received apparently satisfactory answers, and I concluded they would suit my wife, and as I had had a good day’s business I made him an offer of a thousand dollars for the precious ornaments, which he quickly accepted, and I paid him the money.
In the course of a few weeks after I was waited upon by a diamond dealer and his lawyer, with neither of whom I had the honor of any previous acquaintance, and they accordingly introduced each other. The diamond dealer introduced the lawyer and _vice versa_. I immediately concluded I was going to get a good stock order from both of them, but I was soon disappointed as well as surprised to find that these gentlemen had called on an entirely different kind of business, which was totally devoid of commissions on any stock transactions.
They said I had a pair of earrings belonging to them, and I declined to give them up except on return of my thousand dollars.
These two gentlemen bade me good day, and in the course of time I was served with the usual legal papers in a suit which reached the calendar after some time. The young man who sold me the diamonds was put on the stand. He testified that he had received them from a certain diamond broker, but not the dealer in question, with whom he had had no connection whatever.
The diamond broker, it appeared, had long been agent for this dealer, selling diamonds and had, as set forth in the evidence, sold over ten thousand dollars’ worth in a few years.
During the trial a paper was produced to prove that this broker had received these diamonds to show them to a customer, and as it turned out I happened to be the customer. The money which I had paid him for them he had failed to turn over to his employer, of whom I had no knowledge, nor had I any chance of knowing him in the transaction.
All the facts were presented, as above related, to the jury, who, after due deliberation, decided that I must give up the diamonds and suffer to be cheated out of my thousand dollars.
This case is now on appeal. I have since offered to relinquish the diamonds and lose my money, rather than suffer the expense and trouble of continuing the litigation, but plaintiff wants to bleed me further to the tune of $300 to cover his law expenses. To this illegal tribute I have not yet submitted, and have resolved to see what virtue there is in further defense before a higher tribunal.
“Millions of dollars for defence, but not a dollar for tribute,” is a maxim which it is expensive to follow, but after all, the result of such a course, if one can afford it, may be morally healthy.
I consider that these cases, in which I acted a rather unenviable part, are only samples of many which constitute one of the best arguments for a general system of arbitration, such as I have briefly and imperfectly outlined.
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CHAPTER LII.
NEW YORK AS A FINANCIAL CENTRE.
ITS PAST, ITS PRESENT, ITS FUTURE.—BANKING DECADENCE.—GROWTH OF INTERIOR CENTRES.—OBSTRUCTION FROM THE NATIONAL BANK LAWS.—RELIEF DEMANDED.—REQUIREMENTS OF THE FUTURE.
What New York has been as a centre for the settlement of financial transactions is a matter of history; what it is destined to be, in that respect, may not be so entirely certain as some people hastily assume. There are some facts which seem to suggest the question whether our city may prove able to retain its past proportion of the vast settlements of this ever-growing continent; and, although there is nothing to warrant very positive opinions about the future, it must be conceded as an unquestionable historic fact that in late years there have been symptoms of positive decadence in the status of our financial metropolis.
In the past there have been three separate successive sets of conditions directly affecting the financial standing of New York. First, there was the period when this city was the distributing point for nearly all the importations, and for the bulk of our domestic manufactures through all parts of the country. Equally, New York was the almost sole port of export for Western products, and although the exports for the cotton States were made direct from their local ports, yet the financial transactions connected with those shipments were effected through this city. Then New York had virtually no competitor as an exchange centre.
Next came a period during which the larger Western cities, especially Chicago and St. Louis, aspired to become distributors of foreign and Eastern merchandise; a change very naturally following the rapid growth of population in the West and Southwest. Thus a vast jobbing trade became rapidly established at these interior centres, and New York’s share in the distribution of goods to the retail trade became, in a large measure, confined to the Middle and nearer Western States, and to a portion of the South. The jobbers of these new interior centres, however, had still to get their supplies of merchandise from or through the Eastern metropolis; so that, whilst we lost much of our jobbing business, we retained, with some limited exceptions, the importing and commission branches, together with their ordinary rate of increase.
We are now in the beginning of a third and still more important era, during which both the importing and commission branches of our trade are threatened with invasion. The Western jobbing houses have attained a standing which warrants their importing direct from the countries of production, instead of through New York. Another Western and Southwestern consumption has risen to such a magnitude as to encourage the creation of manufacturing establishments in the vicinity of the markets. The West is rapidly becoming a competitor in the leading branches of manufacture with the East, and is evidently destined to supply itself, at no distant day, with a very large portion of the domestic merchandise hitherto contributed through New York merchants, and with the facilities of New York banks. Nor is this all. Chicago and some other Western cities are throwing off their dependence on New York intermediaries for the exportation of grain and provisions, selling them direct to Europe, and shipping the goods on through bills of lading.
These changes are not the result of any mere spirit of blind recklessness grasping after business. They are the product of actual natural economies, and appear to be so decidedly in the interest of the Western merchants that it can hardly be doubted that the new methods have come “to stay.”
Clearly, then, the natural development of national production of commerce is to build up independent financial centres at the interior, the effect of which can only be to check in some measure the growing ascendancy of New York. Perhaps few among my readers will be prepared for the following statistical facts bearing on this question; the conclusions to be drawn from which are not very flattering to the pride of the “Gothamites.”
The transactions at the New York Clearing House are the surest indication of the standing and progress of this city as a financial centre. The records of that institution show that its annual exchanges rose step by step from 5,750 million dollars in 1854 to 48,566 in 1881, an increase of 744 per cent. in 27 years, or at the average rate of 1,585 millions per year. From 1881 there has been the following remarkable rate of decline:
In 1881, the exchanges were 48,566 millions of dollars. In 1882, the exchanges were 46,553 millions of dollars. In 1883, the exchanges were 40,293 millions of dollars. In 1884, the exchanges were 34,092 millions of dollars. In 1885, the exchanges were 25,251 millions of dollars.
Thus it will be seen that there has been a decline in the transactions of the Clearing House banks of 23,315 millions, or at the rate of 48.4 per cent., within the last four years. Last year the exchanges fell below even those of twenty years previous, when the amount was 26,032 millions. Of course, this very remarkable decrease in the volume of transactions is, in part, attributable to the great falling off in the amount of speculative transactions in 1885, as compared with 1881. This, however, can only account to a comparatively small extent for such a vast change. Something is also to be attributed to the general decline in the prices of merchandise and investments during the period; but this explanation is also entirely inadequate, for the average fall in prices did certainly not exceeded 20 per cent., while the decrease in the exchanges, as already shown, had been 48.4 per cent. Moreover, on the other side, some offset against the decline in speculation and in prices must be allowed on account of an increase of five to six millions in the population of the country during the interval; which, alone should call for an increase of 10 per cent. within this period. It is still more significant that, since the year 1872, the capital of the banks in the New York Clearing House has been reduced from $84,400,000 to $58,600,000, a decline of 30 per cent.; which at least implies that banking has become less profitable than it formerly was, and which could scarcely have happened if New York had retained its wonted share of the increase of financial operations arising from the growth of population and commerce in the nation at large.
Some light may be thrown on these changes by a comparison between the ratio of progress in the transactions of the Clearing Houses of New York and Chicago respectively.
In 1866, the first complete year of the Chicago Clearing House, the clearings amounted to $453,800,000, while in 1885 the figures reached $2,318,500,000—an increase of 410 per cent. At New York, in 1866, the clearings were $28,717,000,000, and in 1885 they had fallen to $25,250,000,000—a decrease of 12½ per cent. within two decades of great national progress, and while the population tributary to this city had increased over twenty millions.
In the year 1879—the period of the resumption of specie payments and of the beginning of a great revival of commerce and of financial enterprise—the Chicago Clearings were $1,257,700,000, and last year they were $2,318,500,000, showing an increase of 84.3 per cent. The clearings at New York, within the same period, show an increase of about ¼ of one per cent.
It has already been shown that the capital of the banks in the New York Clearing House (exclusive of surplus) fell 30 per cent. below 1872 and 1886; on the other hand, the capital of the banks in the Chicago Clearing House rose from $9,845,000 in 1872 to $16,928,000 in the present year, an increase of 72 per cent.
The foregoing comparisons show that although the clearings at Chicago are only about one-tenth those of New York, yet the former city is making very rapid strides, while here we are virtually retrograding, and confirm the conclusion above expressed, that the importance of New York as a financial centre is suffering from diversion of settlements and of banking facilities to the larger cities of the interior, and especially to Chicago.
So far as this tendency is the result of natural changes in conditions, it is inevitable and must be permanent, if, indeed, it be not destined to gain in force and extent. But so far as the change is due to artificial obstructions to banking operations, it is susceptible of modification.
And here I may be permitted to venture certain suggestions which may quite possibly encounter objections from men more than my peers in banking experience and wisdom. It has long been my conviction that the banking arrangements existing at New York are far from satisfying the requirements of a city that not only aspires to be, but also possesses many adaptations for occupying the position of the great financial centre, not only for domestic settlements, but also for international exchanges.
The bulk of our banking transactions are done by banks incorporated under either national or State laws. Admirably as the national banking system, taken as a whole, is constructed, yet it includes some important positive disqualifications for its institutions performing an important class of operations essential to a great centre of exchanges. It was, perhaps, not to be expected that a system designed mainly for provincial cities and for rural populations should adequately provide for these broader wants. Nor could any uniform and homogeneous system be expected to be very perfect and satisfy at the same time both classes of requirements. Interior banks, whose management must be expected to be more or less lacking in experience and competency, may need to be placed under legal restraints, which, in the case of a thoroughly conducted metropolitan bank, would be not only needless, but positively injurious. Unfortunately, this discrimination has received little recognition in our national bank legislation; on the contrary, that larger discretion which should have been conceded to the higher training and more select ability that administer the metropolitan banks, has been ignored, and heavier restrictions have been placed upon the New York national banks than upon those of any other part of the national system.