Armstrong v. American Exch Nat Bank of Chicago

• Citation: 10 S.Ct. 450,133 U.S. 433,33 L.Ed. 747
• Parties: ARMSTRONG v. AMERICAN EXCH. NAT. BANK OF CHICAGO, (two cases.)
• Decision Date: 03 March 1890
• Court: United States Supreme Court

133 U.S. 433

10 S.Ct. 450

33 L.Ed. 747

ARMSTRONG v. AMERICAN EXCH. NAT. BANK OF CHICAGO, (two cases.)

March 3, 1890.

[Syllabus from pages 433-435 intentionally omitted]

John W. Henon, for appellant.

W. H. Swift and C. B. Matthews, for appellee.

[Citations from pages 435-436 intentionally omitted]

BLATCHFORD, J.

These are appeals by David Armstrong, receiver of the Fidelity National Bank, of Cincinnati, Ohio, from decrees rendered against him by the circuit court of the United States for the southern district of Ohio, in two suits in equity, brought against him in that court by the American Exchange National Bank, of Chicago, Ill. The first case will be referred to as 'No. 1,110,' and the second case as 'No. 1,111.'

No. 1,110 was commenced on the 5th of November, 1887, by a petition, which was demurred to by the defendant. The demurrer was overruled, the defendant answered the petition, and there was a replication to the answer. Then, by leave of the court, a bill in equity was filed in place of the petition. The bill sets forth following facts: The plaintiff is a corporation under the laws of the United States, doing a general banking business in Chicago, Ill. The defendant is the receiver of the Fidelity National Bank, of Cincinnati, Ohio, a corporation created under the laws of the United States, which did a general banking business in Cincinnati, Ohio. On the 15th of June, 1887, the plaintiff became the owner and holder of a draft drawn by the Fidelity Bank on the Chemical National Bank, of the city of New York, a copy of which, with all credits and indorsements thereon, is as follows:

'The Fidelity National Bank.

'$100,000.00. No. 16,412.

'Cincinnati, June 14, 1887.

'Pay to the order of American Exch'ge Nat. B'k, Chicago, one hundred thousand dollars.

'BENJ. E. HOPKINS, As. Cas. Cashier.

'To the Chemical National Bank, New York City.'

Indorsed: 'Without recourse. A. L. DEWAR, Cashier. Dep. acct. C. J. Kershaw & Co. C. J. KERSHAW & CO. Pay American Exchange Nat. Bank, New York, account of American Exchange Nat. Bank of Chicago, 15 June, 1887. A. L. DEWAR, Cash.'

At the time the draft was drawn, Benjamin E. Hopkins was the assistant cashier of the Fidelity Bank, and by its authority the signature, 'BENJ. E. HOPKINS, As. Cas.,' was used for the signature of that bank. Within a reasonable time after the plaintiff became the owner of the fraft, to-wit, on June 17, 1887, it was presented to the drawee for payment, which was refused. It was protested for non-payment, and notice of the demand, refusal, and protest was forthwith given to the Fidelity Bank; and thereupon that bank became liable to the plaintiff in the sum of $100,000, with interest from June 17, 1887. After the draft was drawn, and the plaintiff had become its owner, the Fidelity Bank, without the knowl- edge of thep laintiff, ordered the drawee not to pay the draft; and the drawee, in refusing to pay it, was acting in accordance with such instructions. On the 27th of June, 1887, the comptroller of the currency of the United States, acting under the statute, appointed the defendant receiver of the Fidelity Bank. On the 12th of July, 1887, a decree was rendered by the circuit court of the United States for the western division of the southern district of Ohio, in a proceeding instituted by such comptroller against the Fidelity Bank, adjudging that its franchises had been forfeited, and declaring it to be dissolved. In September, 1887, the claim of the plaintiff was presented to the receiver in due form, but he rejected it. The prayer of the bill is for a decree that such claim for $100,000, with interest from June 17, 1887, to June 27, 1887, is a valid claim against the estate in the hands of the defendant as receiver, and that he be directed to satisfy it by paying dividends upon it from the assets of the Fidelity Bank; and for general relief. The defendant answered the petition; and, after the bill was filed, it was ordered that such answer stand for an answer to the bill, and that the replication which had been filed to it stand also. The defense set up in the answer is that the plaintiff is not the owner of the draft; that it was signed by Hopkins, and came into the possession of the plaintiff, without any consideration paid for it by the plaintiff to the Fidelity Bank; and that that bank never received any consideration from any person for it, and is not indebted to the plaintiff on account of it. It was admitted of record that the draft was presented to the drawee within the reasonable time allowed by law; that payment was refused; that it was protested for non-payment; and that notice of demand, refusal, and protest was given in due time to the Fidelity Bank; and, also, that the defendant, on October 31, 1887, declared and has paid a dividend of 25 per cent. on all claims against the Fidelity Bank and the receiver, approved or adjudicated as valid claims.

Besides cases Nos. 1,110 and 1,111, a third suit was brought, and testimony was taken in all three of them at the same time. It was stipulated of record that all depositions taken or to be taken in one of the three cases might be read by either party in all of them. After a hearing on pleadings and proofs, a decree was entered, on the 3d of December, 1888, in No. 1,110, setting forth that, on the 15th of June, 1887, the plaintiff became, and had ever since been, the owner of the draft in question; that it was duly presented to the drawee and payment refused, and the Fidelity Bank had due notice; that the claim was duly presented to the receiver and rejected; that it is a just and valid claim, and should have been allowed by him; that the plaintiff is a bona fide holder of the draft for a valuable consideration before maturity, without notice of any want of consideration, free from all equities or defenses whatsoever; and directing the defendant to allow the claim as one for the full amount of $100,000 against the assets in his bands as receiver, to satisfy it by paying such dividends as had been made theretofore, and as should be made thereafter, from the assets of the Fidelity Bank in due course of administration, and to pay the dividend of 25 per cent. already declared October 31, 1887, with interest from that date until the date of payment, and also the costs of the suit. From that decree the defendant has appealed.

No. 1,111 was commenced by a petition filed on the 5th of November, 1887, which was demurred to, and the demurrer was overruled. The defendant then answered the petition, a replication was filed to the answer, and then leave was granted to the plaintiff to file a bill in equity instead of the petition. That bill sets forth as follows, in addition to the same formal matters set forth in the bill in No. 1,110: On the 14th of June, 1887, the Fidelity Bank issued a certificate of deposit, or letter of advice, addressed to the plaintif , of which the following is a copy 'Briggs Swift, president; E. L. Harper, vice-president; Ammi Baldwin, cashier; Benj. E. Hopkins, ass't cashier. U. S. depository. The Fidelity National Bank. Capital, $2,000,000.00; surplus, $400,000.00. Cincinnati, June 14th, 1887. The American Exchange National Bank, Chicago, Illinois: Gentlemen: Messrs. Wilshire, Eckert & Co. have deposited two hundred thousand ($200,000.00) dollars to your credit for the use of C. J. Kershaw & Co. Respectfully yours, BENJ. E. HOPKINS, As. Cas.' At the time this certificate of deposit was issued, Benjamin E. Hopkins was the assistant cashier of the Fidelity Bank, and his signature, 'BENJ. E. HOPKINS, As. Cas.,' was used as the signature of that bank. The certificate was delivered by it to the plaintiff on the 15th of June, 1887, and the plaintiff has owned it ever since. On the faith thereof, the plaintiff, at the request of said C. J. Kershaw & Co., on said 15th of June, paid to said C. J. Kershaw & Co., and upon their orders, the full amount of $200,000, and by means thereof became entitled to recover from the Fidelity Bank the full amount of the certificate. On June 18, 1887, the plaintiff presented the certificate to the Fidelity Bank, at its banking office in Cincinnati, and demanded payment thereof, which was refused. The plaintiff became indebted to the Fidelity Bank in the sum of $1,302.77, for a balance on general account. After deducting such balance, there was due from the latter to the plaintiff, at the time of such demand, $198,697.23, which amount is still due, with interest from June 18, 1887. In September, 1887, that claim was presented to the defendant for allowance, but he rejected it. The prayer of the bill is for a decree that the claim, amounting to $198,697.23, with interest from June 18, 1887, to June 27, 1887, is a valid claim against the assets in the hands of the defendant as receiver, and that he be directed to satisfy it by paying dividends upon it from the assets of the Fidelity Bank in due course of administration.

The answer to the petition, and the replication thereto, were ordered to stand in respect to the bill, and like stipulations were made as in Case No. 1,110. The defense set up in the answer is as follows: One Joseph Wilshire was a member of the firm of Wilshire, Eckert & Co. E. L. Harper, Benjamin E. Hopkins, the assistant cashier of the Fidelity Bank, and Wilshire conspired to defraud the Fidelity Bank. Harper, Hopkins, and Wilshire, with other persons, were, at and before the 14th of June, 1887, engaged in what is called 'a deal' in wheat, which is speculating in wheat, in Chicago, by buying very large amounts of wheat on paying a margin or percentage of the purchase price, and entering into contracts for future delivery to them of wheat in large quantities, upon which contracts they were advancing and paying a margin, or part of the price of the wheat. The object of the speculation and purchase under the contracts was to enable said parties to own and control all the wheat then in Chicago, or to arrive within...