Yardley v. Philler, 296

• Decision Date: 24 May 1897
• Docket Number: No. 296,296
• Parties: YARDLEY v. PHILLER et al
• Court: U.S. Supreme Court

167 U.S. 344

17 S.Ct. 835

42 L.Ed. 192

YARDLEY

v PHILLER et al.

No. 296.

May 24, 1897.

H. B. Gill and S. W. Pettit, for appellant.

A. T. Freedley and John G. Johnson, for appellees.

Mr. Justice WHITE delivered the opinion of the court.

The Clearing-House Association of Philadelphia is a voluntary organization, created by the co-operation of national banks doing business in that city. Its affairs are governed by rules and regulations adopted by agreement between the banks forming the association, and the general direction of its operation is under the control of a president, secretary, and manager, and of a committee selected by the members of the association. As the name of the association implies, it is intended to afford a uniform and convenient method by which daily settlements of balances can be had between the banks entering into the association. In addition to the function of affording a means for the daily clearing of balances, the Clearing-House Association, by agreement among its members, issued, at periods when it was deemed best to do so, clearing-house certificates. These certificates were delivered, under the discretion of the managers, when applied for by a member of the association, and were secured by the pledge of bills receivable or assets taken from the portfolio of the bank obtaining the certificates. These certificates were available as cash in settlements between the banks, and for other purposes; and the object of issuing them was, in times of panic or stringency, to create, to the extent of the certificates, solidarity of responsibility between the banks, as each bank was liable for a proportionate share of the certificates in case of default in their payment, thus fortifying the credit of one by the credit of all. Moreover, the certificates afforded a means by which a bank with good assets could use them in order to obtain certificates which were, for banking purposes, the equivalent of cash, when, from any stringency or panic, the assets themselves, although entirely sound, could not be readily convertible into current money.

Article 2 of the constitution of the Clearing-House Association provided as follows:

'Art. 2. Its object shall be to effect at one place the daily exchanges between the several associated banks, consisting of a morning exchange and a runners' exchange, and the payment, at the same place, of the balances resulting from such exchanges. The responsibility of the association for such exchanges is strictly limited to the faithful distribution by the manager, among the creditor banks for the time being, of the sums actually received by him; and, should any losses occur while the said balances are in the custody of the manager, they shall be borne and paid by the associated banks in the same proportion as the expenses of the clearing house, as hereinafter provided for.'

Article 11 said:

'Art. 11. Should any of the associated banks fail to appear at the clearing house at the proper hour, prepared to pay the balance against it, the amount of that balance shall be immediately furnished to the clearing house by the several banks exchanging at the establishment with the defaulting bank, in proportion to their respective balances against that bank, resulting from the exchanges of the day, and the manager shall make requisitions accordingly, so that the general settlement may be accomplished with as little delay as possible. The respective amounts so furnished the clearing house on account of the defaulting bank will, of course, constitute claims on the part of the several responding banks against that bank: provided, that the amount of the duebill given by the defaulting bank in settlement of its debit balance in the runners' exchange of the previous day, and deposited by the clearing house in its depository bank, shall be deducted from the total charge of such bank, and shall be the first claim against the securities deposited by the defaulting bank, under article 17.'

Article 17 was as follows:

'Art. 17. Each bank, member of the Clearing-House Association, shall deposit securities with the clearing-house committee as collateral for their daily settlements, in the following percentage or assessment on capital:

'(1) Banks with capitals of $800,000 and over, ten per cent.

'(2) Banks with capitals of $500,000 and under $800,000, fourteen per cent.; but not to be required to deposit over $80,000.

'(3) Banks with capitals over $250,000 and under $500,000, twenty per cent.; but not to be required to deposit over $70,000.

'(4) Banks with capitals of, and under, $250,000, shall deposit not less than $50,000.

'The committee shall apply the deposit of any defaulting bank to the payment of the balance due by such bank at the clearing house, or to the reimbursement, pro rata, of the several banks furnishing said balance, under article 11; and the surplus, if any, shall be held as collateral security for other indebtedness to members of this association.'

By article 9 of the constitution the hour for making the morning exchange at the clearing house was fixed at 8:30 o'clock, and the hour for making the runners' exchange at half past 11. By the same article it was provided that a bank becoming a debtor by the morning clearing must pay the sum debited to it to the clearing house between the hours of 11 and 12 o'clock that day, and at 12:30 o'clock of the same day the bank, being a creditor in the daily clearing, should receive from the manager of the clearing house the sum of the credit to which it was entitled. The settlement at the runners' exchange was made by due bills, and these duebills were deposited by the manager of the clearing house in his bank account, kept with one of the banks belonging to the association, and were checked against by him as if the duebill were cash. Such duebill, when so received on deposit by the bank, and treated by it as cash, became a credit item, presented by it, in the clearing of the following morning. In addition, where claims were presented by the runner of one bank for payment to another bank during the course of a business day, the bank by whom the money was to be paid, to obviate the risk of carrying it, instead of handing over money, gave to the runner a duebill for the amount, which, on its face, was stipulated to be payable in the clearing of the next day.

The Keystone National Bank was a member of the Clearing-House Association. It deposited with the association, in accordance with the rules, securities to guaranty its obligation to meet its daily clearing. It had obtained, moreover, from the Clearing-House Association, clearing-house certificates to a large amount, and in December, 1890, by an agreement between the association and the Keystone Bank, the securities deposited by the Keystone Bank to guaranty its liability to pay any balance arising from the daily clearing were returned to that bank, and were by it deposited anew with the Clearing-House Association as security for clearing-house certificates. It resulted from this transaction that the Keystone Bank did not have in the hands of the Clearing-House Association any security to guaranty its obligation to meet its daily clearing. At the time, however, when the securities were withdrawn and used by the Keystone for the purpose of securing clearing-house certificates, an agreement was made that, in order to secure the performance of any obligation which might arise from the daily clearing, the Keystone Bank would leave in the hands of the manager of the clearing house the vouchers presented by other banks against it at the time the clearing was made, to be held by the manager until the balance shown to be due by it in the clearing was paid in accordance with the agreement. From December, 1890, until the 20th of March, 1891, in execution of this agreement, whenever in the daily clearing the Keystone Bank owed a balance, it did not take away the vouchers delivered to its settling clerk, but they were turned over to the manager of the clearing house to be held until the obligation of the Keystone Bank resulting from the clearing was made good.

The operation of making the clearing was accomplished by the following method: At the hour named a runner and a settling clerk representing each bank met at the clearing house. These representatives of the respective banks brought with them in separate sealed packages the checks which the banks they represented held against other banks. The runner of each bank thereupon delivered to the settling clerk of the others these packages, taking receipts therefor, so that at the common place of meeting the clerk of each bank received from every other bank the checks drawn against the bank he represented. The making up of these packages for exchange is thus provided for in the rules:

'Rule 3. Sealed packages, well gummed, and sealed with wax, and indorsed with ink or indelible pencil, shall be used exclusively in the morning exchange and in the runners' exchange, and the amounts stated thereon shall be the basis of settlement. These packages, with the seals unbroken, shall be delivered by the messengers of the several banks to their respective institutions; otherwise no responsibility shall attach to the sender.'

After these packages had been received the settling clerk of each bank made up from the indorsements on the packages delivered to him the debits, and stated the credits arising from the sum of the packages delivered by the runner of his bank to the settling clerks of the other banks. The sheets thus made up were then turned over to the manager of the clearing house, by whom they were verified and consolidated. The manager's balance sheet hence, necessarily, contained a statement itemizing the aggregated debits and credits of all the banks concerned in the clearing. Where any fractional sum was due by a bank in consequence of the clearing, this fractional sum was paid to the manager by a duebill, the manager treating this...