Court Opinion

ID: 5548547
Source: CourtListenerOpinion
Date Created: 2022-01-10 21:23:30.444004+00
Date Added: 2024-06-11T08:34:59.659648
License: Public Domain

The Chancellor.
If the object of the parties to this transaction was to commit a fraud upon the Bank of the State of New-York, by imposing upon the officers of that institution as business paper, to be discounted under the previous agreement, the mere accommodation notes of other persons which had been made and loaned to the City Bank, to enable its managers to raise the wind and keep up a false credit in the community, the complainants have no right to ask the aid of this court to relieve them from the consequences of such an act. (Bateman v. Ramsay, Sausse & Scully’s Rep. 459.) And the bill in this case distinctly states that Stringham the cashier, informed Kingman that the arrangement with the Bank of the State New-York was to discount business paper payable in the city of New-York, and that he wanted to borrow this accommodation note because the City Bank had not such business paper as was required by the terms of that arrangement.
Again 5 the arrangement of the cashier of the City Bank, by which the circulating notes of that institution were attempted to be hypothecated or pledged, for the security of the loan of this accommodation note, in such a manner that they should not appear upon the books of the bank, to be bills issued, or in circulation, was evidently made for the purpose of evading the statutory regulation limiting the amount of bills which the safety fund banks were authorized to issue and put in circulation. (See Laws of 1837, p. 515, § 3.) Where the bills of a bank are legally pledged, for the security of a debt or demand due to any other person or institution, so as to entitle the pledgee to hold and use such bills for his indemnity in case the debt is not paid, such bills .must be considered as issued and in circulation within the true intent and meaning of the statute limiting such issues ; as such bills are no longer under the control of the bank. Here, however, there was merely an attempt to evade the law, by making a mere fictitious hypothecation of the bills of the bank contained in this package, while the same . still remained under the absolute control of the institution, in its own vaults. And *15the complainants by such nominal hypothecation obtained neither a legal or equitable lien upon the bills contained in the package : even if the arrangement under which they were thus sealed up was made with the sanction of the directors of the bank, which is not pretended in this case.
The answer of the corporation, under its corporate seal, and after all its property and assets had been legally vested in the receiver, cannot effect, the decision of the question in this case. This is a controversy between the complainants and the receiver alonej the corporation being virtually dissolved by the appointment of such receiver, under the statute which substitutes him in the place of the corporation as to all the corporate property and effects.
It appears, however, in this case, that the City Bank has actually received the proceeds of the note of the complainants, which was discounted by and is now held by the Bank of the State of New-York as a valid claim against the asests of the City Bank in the hands of the receiver; as well as against the complainants, as the accommodation makers of such note. This, therefore, is a debt which in equity as well as at law, ought to have been paid by the City Bank, and which must be allowed as a valid claim upon the fund in the hands of the receiver, in favor of the institution which now holds the note, in settling the amount which is still due on account of the discounted notes. Instead, therefore, of dismissing the complainants’ bill, I shall direct an order to be entered thereon authorizing and requiring the receiver to deliver up that note to the complainants, when the balance for which it is now held shall he paid to the Bank of the State of New-York out of the fund in the hands of the receiver, or out of the safety fund; and if the complainants have paid the note pending this suit, or if they shall pay it before the final liquidation and settlement of the debts due from the City Bank, that he allow the amount of the principal and interest, thus paid, as a debt in their favor against the institution.
Such an order would have been made of course, upon a petition showing these facts. But as the complainants *16have filed their bill making a further claim upon this package of bills, upon which they had no valid claim either at ^aw or equity, they cannot be allowed their _costs in this Suit,