Case Name: EDWIN D. HARTLEY vs. JOHN A. J. CRESWELL, ROBERT PURVIS, AND ROBERT H. T. LIEPOLD, COMMISSIONERS OF THE FREEDMAN'S SAVINGS AND TRUST COMPANY
Court: Supreme Court of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1876-04
Citations: 2 MacArth. 495
Docket Number: No. 4531
Parties: EDWIN D. HARTLEY vs. JOHN A. J. CRESWELL, ROBERT PURVIS, AND ROBERT H. T. LIEPOLD, COMMISSIONERS OF THE FREEDMAN’S SAVINGS AND TRUST COMPANY.
Judges: 
Reporter: Reports of cases argued and determined in the Supreme Court of the District of Columbia (District of Columbia - reported by Mackey)
Volume: 9
Pages: 495–503

Head Matter:
EDWIN D. HARTLEY vs. JOHN A. J. CRESWELL, ROBERT PURVIS, AND ROBERT H. T. LIEPOLD, COMMISSIONERS OF THE FREEDMAN’S SAVINGS AND TRUST COMPANY.
In Equity. —
No. 4531.
When the Freedman’s Saving and Trust Company held a deed of trust to secure money loaned, the actuary had no authority to give a certificate for thereceipt of money which wouldgive a preference to another party over the company itself.
STATEMENT OP THE CASE.
From the pleadings and evidence in this cause it appears that one Evan Lyons, in December, 1873, was indebted to the Freedman’s Savings and Trust Company in the sum of $34,000. The company, for this sum, held the promissory note of Lyons, dated July —, 1872, at twelve months, which was secured by a deed of trust on property -within the District. When the transactions involved in this case were had? the interest on the note was in arrears for more than a year, and the note itself had been long overdue. The officers of the company had caused the property to be advertised for sale under the powers contained in the deed of trust.
Lyons desired to secure a postponement of the sale, and to this end he called on George W. Stickney, who, at the time of this transaction, was actuary of the company, and stated that he had some friends who would advance to him about $3,000 to pay on account of the interest then due upon the indebtedness, if they could be secured in any manner, and if the sale could be postponed till some time next March. Thereupon Mr. Stickney suggested that if the money was paid to the company on account of the interest then due, he would give the parties a receipt for it, agreeing to pay them out of the proceeds of the sale, provided he could sell the property and pay the note, or out of the first payment, if the property was sold at auction by the trustees. In consequence of this arrangement the complainant deposited the sum of $1,200, and Stickney gave him a receipt therefor in the language following :
“ Messrs. Hartley & Bro. have deposited with this company twelve hundred dollars, which will be subject to his check, from the cash payment received from Evan Lyons’s property on Rock Creek.”
Stickney was one of the trustees in the deed of trust. In June, 1874, the trust company became insolvent, and in the month of April, 1875, the commissioners, (who are the defendants in this action,) finding this security among the assets of the company, caused the property to be sold in accordance with the terms of the deed of trust, and purchased it in for about $5,000 less than the amount .of the debt due the insolvent corporation. The complainant, after the sale, demanded that the commissioners should pay him the $1,200 which he deposited at the time he took the aforesaid receipt for that amount. The commissioners refused to pay him. This bill is filed to compel them to make such payment.
Walter S. Cox for complainant:
1st. The facts incontestibly establish an equitable assignment of a portion of the fund. It is substantially a payment of the debt by a volunteer surety, and an assignment of it to him, instead of an extinguishment. The creditor assigns with the consent of the debtor and with notice to the custodian of the debtor’s property, so that Lyons could not have legally paid to the bank so much of the note as the complainant and others had paid, nor could the trustee have done so, out of the proceeds of sale. This made the complainant owner of the debt of Lyons to the bank to the extent of the $1,200 paid by him, and entitled him to call for it out of the cash proceeds of sale. Ryall vs. Rowles, 3 Lead. Cases in Eq., 615, 3 Am. ed., and notes.
2d. It is objected, that the act of March 3, 1865, cln 92, incorporating the bank, provided (section 3) that “the affirmative vote of at least seven members of the board shall be requisite in making any order for, or authorizing the investment of, any moneys, or the sale or transfer of any stock or securities belonging to the corporation,” and that no such vote authorized this transaction.
To this it is answered—
1st. That this is not a sale and transfer in the sense of the law. This was an overdue debt. The debtor had a right to pay the debt in full, and the bank would have been obliged to transfer the notes to the debtor or his assigns. The only difference here is that the debt is partially paid to the bank, and by it assigned to a person designated by the debtor. It was, in short, a payment as far as the bank was concerned, and a transfer only as between Lyons and the complainant.
2d. The provision of the law was directory merely to the officers of the bank. It did not oblige all parties taking securities in the usual course of business from the actuary, who was the cashier, to examine the minutes of the bank’s proceedings. As the bank had the right to acquire and transfer notes, the parties dealing with the bank had a right to presume that the cashier, the executive officer of the bank, had all the necessary authority from the trustees. See 1 Abbott’s Nat. Dig., 238, 239, and cases cited.
Enoch Totten for defendants:
. 1st. It is averred in the complainant’s bill that the money was paid to the company on account of debt of Lyons, and it is asserted in the brief of counsel for complainant that “ it was a payment as far as the bank was concerned.” It is admitted that, if the complainant had paid the entire amount of the debt, the corporation would have been bound to turn overall their evidences of the debt; but it will hardly be contended that, if this had been done, and the property had turned out to be worthless or insufficient security, the complainant could have called upon the trust company to indemnify him for his loss.
The corporation was pressing Lyons for a payment which he could not make, and the complainant voluntarily made it for him, and for his own protection he took the certificate made by Stickney, and it is submitted that such a payment amounted to a cancellation of the debt so far as the bank was concerned, and that the complainant stands in the shoes of Lyons, with the exception that the officers of the bank were bound to give him the benefit of any surplus remaining, in case of a salé, over the amount due to the corporation. How was the bank to be benefited by the payment made by the complainant if it was to refund the money at all events ? The transaction, in this view, would amount to a temporary loan only; it will not be seriously contended that this corporation could, under its charter, become a borrower of money.
It is also insisted that, under the limitations contained in the third section of the act incorporating this institution, the actuary of this company possessed no power to make any such contract as is here contended for in" behalf of the complainant. See United States vs. City Bank, of Columbus, 21 How., 364.
2d. If the transaction of the complainant did not amount to an absolute payment on account of the debt due from Lyons, then does the complainant possess-any higher equities or claims than the general creditor of the corporation ?
Principal Office,
Freedman’s Savings and Trust Company,
G. W. STICKNEY, Actuary.
The Freedman’s Savings and Trust Company was incorporated by law to receive on deposit such sums of money as may, from time to time, be offered therefor, by or on behalf of persons heretofore held in slavery in the United States, or their descendants, and invest the same in the stocks, bonds, Treasury notes, or securities of the United States. The seventh section provides that the corporation may “receive any deposit hereby authorized to be received, upon such trusts and for such purposes, not contrary to the laws of the United States, as may be indicated in writing by the depositor, such writing to be subscribed by the depositor and acknowledged or proved before any officer in the civil or military service of the United States, the certificate of which acknowledgment or proof shall be indorsed on the writing.” Here are two classes of deposits; the deposit in question, if it was a deposit, was not of the kind provided for in the seventh section, and therefore cannot be regarded as a special deposit.
It must abide the fate of all other deposits, and participate in such dividends as may be declared by the commissioners.
The transaction of the complainant can in no sense amount to an equitable assignment of any part of the security until all the claims of the bank upon it shall have been satisfied. There was no assignment, mortgage, pledge, order, or specific appropriation of any kind. Rogers vs. Hosack's Executors, 18 Wend., 319.

Opinion:
Mr. Justice Humphreys
delivered the opinion of the court:
Complainant Hartley exhibits his bill, claiming an equitable lien on trust-property, for the sum of twelve hundred dollars. Evan Lyons, of this District, was indebted to the savings and trust company by note for the sum of 834,000, dated July 27,1872, due in twelve months, secured by deed of trust on land in said District. The note matured, and, not being paid, the land was advertised to be sold. Stickney and Alvord were the trustees. Stickney and Alvord were both officers in the company, Stickney being actuary. The maker of the note, Lyons, applied for time to pay, and i)rocured the complainant to advance him twelve hundred dollars to make a payment on the note. The said sum was deposited in the house of the company, and the said Stickney, actuary of the company, gave to complainant a certificate, reciting that " Messrs. Hartley & Bro. have deposited with this company twelve hundred dollars, which will be subject to his check from the cash payment received from Evan Lyons's property on Bock Creek." This is dated at the office of the company, Washington, December 22,1873. The property intended is the same conveyed by Lyons in trust. The land has been sold by Stickney as trustee, and bought by the commissioners, on account of the debt, for a sum less than the amount due on- the note. Complainant asks that the commissioners be decreed to pay the amount of the said deposit, and in default thereof that a decree be made for the sale of the land to pay the complainant's demand asa preferred lien. The bill does not allege that a resale of the land would yield a larger amount than it did at the sale made, or that there was any irregularity in the sale, or unfairness on the part of trustee or commissioners. The complainant has rather chosen, by himself ancl solicitor, to rest his claim upon the idea of subrogation in' preference to the particular security, assuming that the certificate of the actuary placed him in the front of the company to the amount of his deposit, and in advance of all other depositors in the office of the company. This case involves the question of the extent of the incorporated institution to transact business, and what business it could transact, by which everybody who dealt with it would be bound. There was a deposit in this case of twelve hundred dollars by complainant, and for this amount he has a claim upon the assets of the company. The reception on deposit was an act for which the actuary could, probably, bind the company. But when the actuary undertook to go beyond the mere act of receiving a deposit and making a contract which would bind tbe institution, as a cashier or president of a regular banking-house could do, a different question arises, and we must look to the charter for his authority and the extent of the power of any officer of this company. There has been no charter of any institution drawn with more care, and circumspection, and guards than the incorporation of the Freedman's Savings and Trust Company. That many persons have loosely viewed it as a banking institution, to be governed by the rules applicable to a bank of issue and loans, as ordinarily carried on, is not to be wondered at. But it cannot, legally or equitably, be viewed in the light of any other than an institution of deposit for the safe-keeping of funds got together by the industry, economy, and saving of those who were not presumed to be acquainted with the ways of financiering. It was not a banking institution; it was a trust company, for the purpose of keeping in safety the savings of a particular class of citizens. It is true that loans or investments were authorized; but they were authorized by a certain process, which experience had proved was safe and sure, and by no means were those who were made trustees at any legal liberty to expand into the uncertain realms of speculative operations. The institution had officers, but those officers were denominated by other names than are ordinarily used in application to regular banking institutions. In the case of United States vs. Union Pacific Railroad Company, 91 United States Supreme Court Reports, the justice deliv «ring the opinion of the court — which was unanimous — uses the following language:
<l In construing an act of Congress, we are not at liberty to recur to the views of individual members in detail, nor to consider the motives which influence them to vote for or against its passage. The act itself speaks the will of Congress, and this is to be ascertained from the language used. But courts, in construing a statute, may, with propriety, recur to the history of the times when it was passed; and this is frequently necessary, in order to ascertain the reason as well as the meaning of particular provisions in it."
It cannot be considered as judicial intrusion to remark that the history of the times points to the stubborn fact that •the funds to be deposited were not in the nature of joint stock for the ordinary speculative purposes. The depository was to be a savings trust-place, from which the funds were not to be withdrawn except by the provisions of the statute. The money was originally loaned, in this case, on such security as a trust company might loan money. The funds were those of a peculiarly laboring people. They had been taught to labor from their infancy. They had an idea that the Government which asserted their natural right to freedom would provide for the security of the proceeds of their labor, which proceeds, for the first time in their lives, they had, organically, a right to control. They freely deposited the earnings of their industry in the savings and trust compauy. The Government in which they confided did hem in and circumscribe the powers and authority of the officers, and everybody who dealt with the institution 'was advertised of the extent to which the officers could go. The question of good faith in the officers is not here involved. What was- the authority conferred by the act organizing the institution ? What was the object of the incorporation óf the institution, and what significance is there -in the very name and title of the act? The objects of the institution had been taught by the highest organic authority that they had no rights; and it must be said in their behali that they quietly submitted to that declaration, till the same -organic authority issued a contrary pronunciamento to the world that these people must be free. They did get free; and this institution was immediately established for the deposit of the earnings of their labor. They soon deposited their millions. Counsel have denominated this company as a bank. Ic was not a bank; it was a company, with'trust powers, circumscribed in its operations by the statute which created it. Has the actuary the power to change a security by substituting a creditor of the institution in the place of the institution itself? We must keep steadily in view the nature and imrpose of the trust company. If the amount deposited was to operate as a payment on the note, then the depositor could not claim the right of checking it out. The certificate itself did not undertake to express a general deposit, but a special one, which should be subject to check out of the proceeds of a particular security. This security the company held in trust to cover the amount of money loaned to the original debtor; or, rather, the loan was made of the funds held in trust as an investment in notes or bonds, secured by mortgage. A payment in money was certainly competent to be made on the note, and would, pro tanto, extinguish the debt. But the actuary had no power to change the security. The whole transaction appears to have proceeded on the idea of substituting Hartley & Bro. to the place of the company, even in preference, for twelve hundred dollars. That could not be done in the loose mode adopted. Whatever may be the rights of complainants, they cannot ask a court of equity to require the commissioners to prefer their claim to that of the trust company or other creditors. The term bank is used nowhere in the charter. Provisions are made in similar terms to the rules regarding trustees and guardians of infants and minors. The wards were authorized to labor for themselves and bring their savings to the great reservoir, and, when placed there, those savings were to be held in trust, not to be used in the ordinary mode of banking speculations. The money deposited was the capital of the company, that company being a trust company, to save by loaning, investing exclusively as prescribed by the charter. No power was given to contract a debt or an obligation, save the chartered power. There could be no possible contingency in which it would be proper to contract a debt, for the money was already deposited, to be loaned or invested in a prescribed way. The profits arising from the loans or investments would, in contemplation of the charter, be sufficient to defray the expenses of the institution, and result in savings to the depositors of the original fund. Tfy'e actuary had his duties to perform; the board had its duties. The powers of the actuary were subordinate to the powers of the board. If he went beyond his powers, innocently though it may be, the cestuis que trust are not to be injured, unless they consented to the excess of action. Of this there is no allegation or proof. Equity cannot relieve against a positive injunction of the law. We find the statutory charter, and we must construe it. The complainant acted in good faith; so did the actuary. There would be no equity in requiring the cestuis que trust to abandon their legal rights, which legal rights authorize them to insist upon the strict fulfillment of the charter. By that charter they live or die. That charter was published to the world, and all who dealt with the company did so with constructive notice of its powers. We conclude that the actuary had no authority to bind the. company by the certificate which he gave, that that certificate did not substitute or subrogate the complainant to a preference in the case before us, and the bill must be dismissed for want of equity, but without prejudice.
Bill dismissed without prejudice.