New-York tribune., 1898-12-31
MADISON SQUARE BANK CASE.
THE APPELLATE DIVISION DE'iDho
AGAINST THE EAST RIVER
BRIDGE COMPANY.

Tho Anne,late Division Of the Supreme Court YES
.erdav handed down a decision reversing decision
OF the referee IN the case or Mics NJ y n'l'h anu
lanes O. Cannon. receivers OF the MADISON square
Rank against the East River Bridge Company 20
recover 10000 the sum which was on deposit IN
the bank in the name of the defendant ana was
draw, ont on a check the day the bank failed. by
reason Of knowledge Of the Impending faiiure op-
tanned by Frederick Chlman. who was then presl-
dent OF the East River Bridge Company ana o'-
rector Of the Madison Square Bank as well ana
who Is now president Of ne brooklyn f-e'a'eu
Railroad Companv The referee dismissed the COM
paint Of the receivers but the opinion Of the APP
pellate Division reverses this decision ana ORDERS
new trial
The failure OF the Madison Square Bank was OF a
startling character Upon Investigation II was
found that the mana cement had been careless that
the banks assets had been wasted ana unsaie
loans had been made The East River Bridge COM
Dany had $40 900 deposited with the Madison square
Bank The facts recited in the opinion OF 'he
Appellate Division written by Justice Patterson
are that Mr.. Uhlman. "a director OF the pdhh.
learned on August s. 1893, that 1t was insolvent and
would be closed on the following day. He knew.
too that the st. Nicholas Bank. which was the
agent OF the Madison Square Bank In the Clearing
House would be responsible for all the checks on
the Madison Square Bank that might be presented
In the Clearing House on the morning OF August "
although the St Nicholas Bank had given notice
,bot :, uould cease to act for the Madison Square
Bank after that date.
simon rhlman. who was largely interested In the
East River Bridge Company also learned on the
night of August s of the imminent failure OF the
Madison Square Bank. Al II o'clock at night he
caused the treasurer Of the East River Bridge Com
pany to sign a check drawn on the Madison square
Bank FOR $1,000. The check was also signed oy
Frederick Chlman president 81 The East River
Bridge Company. ON the morning OF August
Frederick Uhlman took the check to. the Hanover
t,gtr Cslf
that hank to present the check for payment at the
Clearing House The check was presented and
passed by the Clearing House The East RIVER
Bridge Company received credit with the Hanover
National Bank for 5000. and the transfer or that
amount from tho Madison Square Bank TO the East
River Bridge Company was thus effected All these
facts are set forth in Justice Patterson's opinion
Tho receivers Of the bank argue that the trans
action thus described was violation OF the statute
which forblds the transfer OF the assets Of an in
solvent company by a director Of that company for
the purpose Of favorng particular creditor. but
the referee before whom the case was argued re-
fused to sustain this contention.
OF Mr.. Uhlman's connection with the transaction
the Court says:
Frederick Uhlmans dealing with the check after
II was drawn establishes the Intent. HIS active
agency in getting It paid IRON the '1hes the
method OF taking it on August 10 the Hanover
National Bank and inducing aem him TO wh PAS ,bs m
transfer OF the Madison Square Banks funds 10 pay
"A creditor preferentldlly WltnlH tle HedHiHB Va
statute. Whether It was his scheme or not; ne
executed IT, He caused the transfer OF those
moneys to be made II Is entirely immateral by
what method the transfer was effected. II II was
such as a matter OF fact. The act took SO much or
the Madison Square Banks money and passed u
over TO a simple creditor-and that was done py d
person who was director OF the Madison square
Bank knowing of the insolvency OF the bahk h ana
with the intent TO give preference. lhat a1t
defines itself. Here, then. was the case or di-
rector Of the Madison Square Bank using MS
knowledge not only Of the actual or Impending m
solyency OF that bark but OF the fact that me ~
Nicholas Bank had large amount OF the securities
OF the Madison Square Bank; OF the fact tnat what
ever checks drawn the Madison Square Bank
should go through the Clearing House on thc
morning OF August would be paid; or the iact
that the St Nicholas Bank could indemnify Itself
for the payment OF those checks. and OF the fact
that the $50 check thus drawn and presented out
of the due course OF business would be palu IN suc
manner as 10 preference 10 me East
River Bridge Company. and intending that thc as
sets of the Madison Square Bank should De pro-
nortionally depleted. This result would not nave
been accomplished but for the acts OF director OF
the Madison Square Bank. Frederick lhIma OBJ
tanned his knowledge n director or the Ma lson
Square Bank and. unless We are altogether wrong
in the Interpretation Of the statute. ana III out
understanding of what Its purpose Is. the East
River Bridge Company Is not entitled 10 hold inc
money as against the plaintiffs.
Justices Mclaughlin, Van Brunt and O'Brien con-
CURED. and Justice Ingraham wrote dissenting
opinion.