In re Greene

• Decision Date: 16 April 1901
• Citation: 60 N.E. 183,166 N.Y. 485
• Parties: In re GREENE.
• Court: New York Court of Appeals Court of Appeals

166 N.Y. 485

60 N.E. 183

In re GREENE.

Court of Appeals of New York.

April 16, 1901.

Appeal from supreme court, appellate division, Fourth department.

Action by William C. Greene, receiver of the Merchants' Bank of Lockport, against the county of Niagara and others. From an order of the appeallate division (67 N. Y. Supp. 291) reversing an order of the special term appointing a receiver under Laws 1900, c. 614, the receiver appeals. Affirmed.

This appeal involves the validity of chapter 614 of the Laws of 1900, entitled ‘An act for the relief of William C. Greene, as receiver of the Merchants' Bank of Lockport.’ Section 1 of this act authorized an application by Greene as receiver to a special term of the supreme court for the appointment of a referee to ascertain and report the amount of moneys advanced by the bank to Arnold as county treasurer in excess of the amount on deposit to his credit in said bank, for the purpose of paying, and which was used to pay, obligations of the county, and whether there existed any equities which should be considered by way of reduction of such amount, and to report thereon. Section 2 of the act authorized the court to appoint a referee for such purpose, and upon the coming in of his report, if it should appear that any sum of money was advanced by the bank to the treasurer to pay obligations of the county in excess of the deposits in the bank to the credit of the treasurer, and that there was no legal or equitable offset, to confirm the report. Section 3 made it the duty of the board of supervisors to audit, allow, and pay the claim, with interest from the date of the closing of the bank. Section 4 provided that the county should receive notice of the application and be entitled to be heard, and that the statute of limitations should not be a bar to the proceedings therein authorized. The appellate division held the act to be unconstitutional upon the ground that it violates section 16, art. 3, of the state constitution, which provides that ‘no private or local bill, which may be passed by the legislature, shall embrace more than one subject, and that shall be expressed in the title’; and also because it grants a new trial to the receiver upon issues which in an action in the supreme court between himself and the county of Niagara had been by final judgment determined against him. In June, 1894, William C. Greene, as receiver of the Merchants' Bank of Lockport, brought an action in the supreme court against the county of Niagara, Timothy E. Ellsworth, Josiah H. Helmer, and Joshua S. Helmer to recover from said Ellsworth $7,399.45, the amount of alleged overdrafts from said bank as of date October 11, 1893, by John J. Arnold, as county treasurer of the county of Niagara, the proceeds of which overdrafts said Arnold had used to pay the obligations of the county, to secure the payment of which to the bank said Arnold did by writing dated October 11, 1893, assign to the bank a promissory note for $4,669.31, made by the defendants J. S. and J. H. Helmer, and a draft for $5,130.70, made by said J. H. Helmer, but which said Arnold had about the same date deposited with the defendant Ellsworth, who refused to deliver them to the plaintiff, alleging that the county of Niagara owned the same, and that he (Ellsworth) held the same for the benefit of whoever should be found to be entitled thereto; that Ellsworth had collected said note and draft from the makers thereof, upon his agreement with them to hold the proceeds for the benefit of whoever should prove to be the rightful owner thereof; that said county did claim to be such owner. The county of Niagara answered to the effect that Arnold, at the same time that he was treasurer of the county, was also cashier of the bank, and of its predecessor, the First National Bank of Lockport, and that during the same time the defendant J. S. Helmer was the president of the Merchants' Bank and of its predecessor, the First National Bank, and that the defendant J. H. Helmer was the vice president thereof; that prior and up to October 11, 1893, Arnold had fraudulently misappropriated at least $65,000 of the funds of the county in his hands as such treasurer, and that he then deposited said note and draft with the defendant Ellsworth, in order to replace in part such misappropriated funds, of which the said Arnold had wrongfully advanced $18,000 and upwards to the said bank, the said bank and its said officers well knowing the same to be of the funds of said county, none of which the bank had repaid; and that the said draft and note were given to him by the said bank and its officers to secure in part the repayment of such wrongful advances, and the county asked that said Ellsworth pay to it the proceeds of such note and draft. The defendant Ellsworth answered, disclaiming any interest other than as custodian of the fund, with the consent of the parties, subject to the order of the court. The Helmers did not answer.

The final judgment as affirmed by the court of appeals awarded the fund to the county. Greene v. Niagara Co., 8 App. Div. 409,40 N. Y. Supp. 862;Id., 31 App. Div. 634,53 N. Y. Supp. 1104;Id., 161 N. Y. 651, 57 N. E. 1111. The referee in that action found that March 1, 1890, the First National Bank was changed to the Merchants' Bank of Lockport, the latter acquiring all the property rights and effects of the former; that Arnold was cashier, J. S. Helmer president, and J. H. Helmer vice president, of both banks, and they managed the business of the latter bank from its organization to its suspension, which occurred October 6, 1893; that the bank soon after passed into the hands of the plaintiff as receiver; that, when the change in name and organization of the bank was made, the bank had some objectionable paper, which said officers desired to retire, and for that purpose Arnold advanced to the bank $12,000 of the county funds by giving to the Helmers or the bank his checks as county treasurer therefor, and taking as part security therefor a note for $4,400 made by the two Helmers. This was the original note, for which the note mentioned in the complaint was the last renewal; and the parties then understood and intended that it was to secure the county, and was not the individual property of Arnold. The bank subsequently repaid the treasurer all of the $12,000 except the $4,400 thus secured. In 1891 the state authorities objected to certain paper held by the bank, and, in order to retire it, Arnold advanced to the bank, by his checks as county treasurer, $5,150, and received as security therefor to the county, as the bank understood and intended, the draft of J. H. Helmer mentioned in the complaint. The bank did not repay this advance. It thereafter frequently obtained moneys of the county treasurer in like manner, but afterwards restored them. On September 21, 1893, J. S. Helmer, the president of the bank, knew that Arnold personally was a defaulter to the bank for about $30,000, and that his account as county treasurer was overdrawn. In September, 1893, after the 21st, the president permitted Arnold to overdraw his account by three checks, as county treasurer, aggregating $7,906.55. The referee found that Arnold delivered the note and draft mentioned in the complaint to Ellsworth to protect in part Arnold's sureties upon his bond as county treasurer; also that the total overdraft of Arnold's account as county treasurer, October 11, 1893, was $6,428.33; that of the moneys overdrawn, on August 30, 1893, Arnold paid $1,550.31 on an indebtedness of the county of Niagara to the county of Erie, on September 9, 1893, $1,826.22 like indebtedness to the Willard Asylum, and on September 29, 1893, $3,906.55 for state taxes,-total, $7,283.08; that the credits to his account after August 30, 1893, reduced the overdraft to $6,428.33. The referee further found that Arnold's advances to the bank in 1891, for which he received the note and draft as security, were charged to his account as county treasurer, and that the overdraft would not exist if the bank had repaid the amount, and his account had been credited with the payment....