Reed v. Stapp

Decision Date01 October 1892
Citation52 F. 641
PartiesREED v. STAPP.
CourtU.S. Court of Appeals — Seventh Circuit

F. F Reed, for plaintiff in error.

Kirkpatrick & Alexander, for defendant in error.

Before HARLAN, Circuit Justice, WOODS, Circuit Judge, and JENKINS District Judge.

JENKINS District Judge.

This suit was brought at law by Willet B. Jenks, since deceased to recover the amount of a certificate of deposit, of which a copy follows:

'No. 26,161.

THE FIRST NATIONAL BANK OF MONMOUTH, ILL.

'$10,000.

Nov. 5th, 1881.

'Wm. M. Gregg has deposited in this bank ten thousand dollars, payable to the order of himself six months after date, on return of this certificate.

'B. T. D. HUBBARD, Cashier.'

Endorsed: 'Pay to bearer. W. M. GREGG.'

The case, as disclosed by the record, was this: The First National Bank of Monmouth was organized under the national banking law in the year 1863. The period of legal existence granted by law was about to expire, and could not be extended. Thereupon, in June, 1882, the bank went into voluntary liquidation, and adopted the necessary legal steps to wind up its affairs. A new bank with the same name was formed by substantially the same persons who owned the stock of the former bank, and with the same persons as officers who held similar positions in the old bank. The stockholders of the old bank distributed among themselves the accumulated profits of this business, amounting to 66 per cent. of its capital. On the 5th day of July, 1882, the old bank transferred to the new bank its bank building, and all the fixtures, books, and appurtenances of the bank, its redemption fund with the United States treasurer, its bills receivable as shown by its books, and, in consideration thereof, the new bank agreed in writing to pay off and discharge all the debts and liabilities of the old bank to its depositors of all kinds upon book account and certificates of deposit 'to the extent and amount as shown by the books,' whenever and as they should be demanded. The new bank continued business until April 8, 1884, when it closed its doors, being compelled thereto by the acts of its cashier, who proved a defaulter to the amount of upwards of $100,000.

The certificate of deposit upon which suit is brought was issued by the cashier of the old bank, without consideration, without deposit of the amount therein stated by Gregg or by any other person, and solely by way of margins to speculative transactions between Hubbard, the cashier, and the payee, William M. Gregg, or his firm of Gregg, Son & Co., of Chicago. The certificate was not entered upon the books of the old bank. The bank number borne by the certificate was in fact the number of a certificate issued on the 23d day of February, 1881, to one Langdon, for the sum of $100, and which was duly entered upon the books, and paid by the bank shortly after its issue, and before the date of the Gregg certificate. The certificate here in question was first pledged by Gregg, Son & Co., on September 6, 1883, to the Continental National Bank of Chicago, as collateral to a loan of $10,000. That loan was paid in October, 1883. It was then used on December 27, 1883, as collateral with the same bank for a loan which was paid January 26, 1884. It was again pledged by Gregg, Son & Co. to the Continental National Bank as collateral to two notes of that firm, each for $5,000, payable on demand; one dated March 7, 1884, and the other dated March 24, 1884. After the loan of December 27, 1883, and before its payment, the cashier of the Continental National Bank, becoming suspicious of the certificate by reason of its age, had an interview concerning it with Hubbard, the cashier. He asked Hubbard 'if the certificate was good; if it was genuine; and he said it was a genuine certificate;' that it was a private matter with Gregg, and was connected with his (Gregg's) family affairs. Payment of the certificate was demanded of the new bank on the 8th day of April, 1884,-- the date of its failure,-- and the certificate protested for nonpayment on the following day. On the 11th day of April, 1884, a transaction was had by which Willet B. Jenks, the intestate of the plaintiff in error, paid to the Continental National Bank the amount of the indebtedness of Gregg, Son & Co., and received from the bank the certificate of deposit in question.

The right to recover upon the certificate is claimed upon the ground that the Continental National Bank was a bona fide holder for value of the certificate, and that the defendant bank is estopped to assert either the invalidity of the certificate, or its nonliability therefor by reason of the declarations of its cashier to the cashier of the Continental National Bank upon the faith of which the loans of March 7th and March 27th were made; and that Jenks, by purchase from the bank, although after dishonor of the certificate, stands in the shoes of the bank, and takes its title to the certificate, unaffected by equities as between the maker and Gregg.

The contention on the part of the defendant is that the certificate was issued by the former First National Bank of Monmouth, and not by the defendant bank; that the latter never assumed its payment, the certificate not appearing upon the books of the old bank; that the certificate was fraudulent in its inception, and of no effect in the hands of Gregg, the payee; that the Continental National Bank took it after its maturity, and charged with the equities attaching to it in the hands of Gregg; that the old bank could not be estopped by the declarations of Hubbard, made after the bank had ceased to exist; that the defendant bank is not estopped because, among other reasons, the declarations only went to the genuineness of the certificate as the paper of the former bank, and not to the liability of the defendant bank...

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    ... ... v. Planters' Bank, 16 Wall. 250, 257, 21 L.Ed. 278; ... Lehnen v. Dickson, 148 U.S. 71, 77, 13 Sup.Ct. 481, ... 37 L.Ed. 373; Reed v. Stapp, 3 C.C.A. 244, 246, 52 ... F. 641; Adkins v. Sloane, 8 C.C.A. 656, 60 F. 344; ... Kentucky, etc., Co. v. Hamilton, 11 C.C.A. 42, 63 F ... ...
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