#### Claggett *et al. v.*Metropolitan Nat. Bank.

*(Supreme Court, General Term, First Department.*

May 16, 1890.)

Banks and Banking—Dissolution—Redemption op Notes.

Laws N. *Y.*1865, c. 97, § 8, provides that any state bank becoming a national bank shall he deemed to have surrendered its charter on compliance “with the requirements of this act, ” hut that it shall continue a body corporate for three years after-wards for the purpose of closing its concerns, but not for the purpose of the business for which it was established. Section 6 provides that, when authorized to commence business as a national bank, all assets of the old bank shall vest, without any conveyance, in the national bank, which, on returning the bills of the state bank to the hanking department of the state, may receive the stock pledged to secure the redemption of the same, and that it shall be subjected to the same rules as the state banks with regard to the final redemption of the circulating notes of “ su eh state banks so converted into national associations. ” Section 8 provides that the act shall not be construed so as to release the national bank from any obligation incurred before becoming such association. *Held,*that the conversion of a state bank into a national bank did not constitute such a “ closing of the business ” of the state bank that it could limit its liability to redeem its circulating notes by proceedings under.Laws 1859, c. 836, authorizing state banks intending to close business to publish notice that any persons having any of the circulating notes of the bank should present them for redemption within six years, and, failing to do so, the bank would no longer be liable on such notes. Affirming 4 N. *Y.*Supp. 115.

Appeal from special term, New York county.

Action by Sumner B. Claggett and Charles T. Chickering, as administrators of the estate of James H. Paine, against the Metropolitan National Bank, to recover the amount of certain bank-bills issued by the Metropolitan. Bank while incorporated under the laws of the state, and before it became a national bank. On March 14, 1867, such bank deposited with the bank superintendent of the state a sum of money equal to its outstanding circulation, and the superintendent published notice that the circulating notes of the bank would be redeemed at par at any time within six years from the date of notice, and that all notes that were not presentedfor redemption within that time should cease to be a charge upon the fund in the hands of the superintendent for that purpose. The bank-bills in suit were not presented for redemption within seven years from the date of such notice. There was judgment for plaintiffs, and defendant appeals. For opinion of Mr. Justice Patterson at special term, see 4 N. Y. Supp. 115.

Argued before Van Brunt, P. J., and Brady and Bartlett, JJ.

*Peabody, Baker & Peabody, (Fisher A. Baker,*of counsel,) for appellant. *Theo. H. Swift, (Leslie W. Russell,*of counsel,) for respondents.

Brady, J.

The defendant, while a banking association under the laws of this state, and in 1865, having become a national banking association under the provisions of the act passed in that year, (chapter 97,) and desiring to retire its circulating notes issued while a state bank, proceeded to comply with the provisions of the act of 1859 (chapter 236) relating thereto. In its con*166version to a national bank, and in the proceedings, under the act last mentioned, to retire its notes, every requirement was observed; and the question presented, therefore, *in limine,*is whether the act of 1859, the conversion having taken place, is applicable. The learned justice in the court below held that it was not, for the reason that the act of 1859 applied only to banks having an intention to close their business absolutely, and not to those intending to continue under any other form. It may not be necessary to add to the views expressed by the learned justice in the court below, sustaining this proposition, but nevertheless a few observations will be indulged in.

It is true that by section 1 of the act of 1865 it is declared that its provisions shall be taken and deemed as an amendment of the laws of this state in reference to the banking business, and therefore they were ingrafted on those laws; and for this reason, if no other exists, it must be conceded that whether it was the intention of. the legislature to provide that the two proceedings should go on *pari passu,*that is, the national organization, and the retirement of its notes by the bank while a state corporation, is a difficult and troublesome question. The act of 1865, it must be observed, will be read in vain to discover any language, except by remote implication, which tends to express such a design. In the act of 1859, however, we find not only language indicating the expressed purpose of the statute to be to facilitate existing state banks to retire their circulation, but language from which that purpose, and that purpose only, is declared and quite manifest. It provides, among other things, that there shall be a publication in the state paper by the superintendent of banking that the bank-notes will be redeemed by him, and must be presented within six years from the date of the notice; and that upon the expiration of such six years (ail proceedings being regular) it shall be lawful for the superintendent to surrender to the banking association, and ij; shall be entitled to receive from him, all the money remaining in his hands after such redemption, except so much as may be necessary to pay the reasonable expenses chargeable against the accounts, including the publication of the required notices. The money so to be refunded is whatever remains of the amount required to be deposited in order to fully meet the outstanding circulation at the time the proceeding is initiated, whatever that may be. By section 5 it is further provided.that a banking association, after the payment of all the circulating notes issued by it which shall have been presented within the time required by the notice to be published, as already stated, and of all other lawful claims and demands against the bank, it shall divide the remaining property and effects of the bank among the stockholders thereof, or their personal representatives, according to the respective shares and interests therein. It will at once be perceived that if the bank continues in another form, all its assets being transferred to the new formation by operation of the statute, the division contemplated by the section cannot be made; and in that respect, at least, the object and design of the act is frustrated. A provision of this kind would, by implication, if there were no express language leading to such a result, determine the character of the statute and its purpose. It seems to be a necessary corollary, if the distribution is to take place of any surplus, that the absolute death of the corporation is not only contemplated, but indispensable, in order to carry out the provisions of the statute. For these reasons, in addition to those assigned by the learned justice in the court below, (4 N. Y. Supp. 115,) it is thought that the judgment is correct, and should be affirmed, with costs.

Van Brent, P. J., concurs. Bartlett, J„ concurs in result.