Bank v. Kennedy
| Decision Date | 01 December 1872 |
| Citation | 17 Wall. 19,84 U.S. 19,21 L.Ed. 554 |
| Parties | BANK v. KENNEDY |
| Court | U.S. Supreme Court |
ERROR to the Supreme Court of the District of Columbia.
Kennedy, receiver of the Merchants' National Bank, brought suit in the court below against the National Bank of the Metropolis, to recover the balance alleged to be due on a check for $50,000, dated May 1st, 1866, drawn by one Robinson on the said Bank of the Metropolis, in favor of the said Merchants' Bank, and duly presented for payment. On presentation of the check the Bank of the Metropolis admitted its obligation to pay it, but as part payment thereof, delivered to the messenger of the Merchants' Bank a note of C. A. Sherman, cashier of that bank, for $20,000, dated February 27th, 1866. The Merchants' Bank declined to receive this note as payment, and sent it back demanding the cash. But the Bank of the Metropolis refused to take back the note, insisting that although it was signed by Sherman, individually, it was given for account of the Merchants' Bank, and for a loan made to it. The principal controversy in the case arose upon the question whether the note was given by Sherman on his own account or on account of the Merchants' Bank.
Certain preliminary questions, however, were raised with reference to the authority of the receiver to bring the action.
Verdict and judgment, under the rulings as to evidence, and under the charge, were given for the plaintiff; and the defendant, the Bank of the Metropolis, brought the case here. This court disposed of the different points raised, considering them in the order of the several assignments of error.
Messrs. Hubley Ashton and W. D. Davidge, for the plaintiffs in error; Messrs. R. T. and W. M. Merrick, contra.
The first and second errors assigned are that the plaintiff, who is a receiver appointed by the comptroller of the currency under the fiftieth section of the National Banking Law, is not entitled to bring suit without the authority or direction of the said comptroller—which is not alleged or shown in this case; and that the action cannot be maintained by the receiver in his own name as such.
These objections are based upon the language of the act referred to, as well as the general nature of the receiver's office. The statute1 enacts:
'That on becoming satisfied, as specified in this act, that any association has refused to pay its circulating notes as therein mentioned, and is in default, the comptroller of the currency may forth with appoint a receiver, and require of him such bond and security as he shall deem proper, who, under the direction of the comptroller, shall take possession of the books, records, and assets of every description of such association, collect all debts, dues, and claims belonging to such association, and upon the order of a court of competent jurisdiction, may sell or compound all bad or doubtful debts, and, on a like order sell all the real and personal property of such association, on such terms as the court shall direct; and may, if necessary to pay the debts of such association, enforce the individual liability of the stockholders provided for by the twelfth section of this act; and such receiver shall pay over all money so made to the treasurer of the United States, subject to the order of the comptroller,' &c.
We have already decided in the case of this very receiver that he may bring suit in his own name or use the name of the association.2 The subject was also lately discussed in the case of The Bank of Bethel v. The Pahquioque Bank,3 and the same views were held; the action in that case being brought against the insolvent bank. This disposes of the question as to the legal right of the receiver to sue.
It remains, therefore, to determine whether it is necessary for the receiver, before bringing suit in an ordinary case of a debt or claim due the bank, to have the order of the comptroller for that purpose. In the case already referred to, the receiver had instituted a suit in equity against some of the stockholders of the bank for the purpose of charging them with the personal liability prescribed by the twelfth section of the act; and we held that he had no right to do this without the comptroller's direction. But it will be perceived that that was a very special case, out of the ordinary course, and one which involved an important consideration of the policy to be pursued. Stockholders are not ordinary debtors of the bank, but are rather in the light of creditors, their stock being regarded as a liability. They are entitled to all the surplus that remains, if any should remain, after the payment of the debts. They are only conditionally liable for those debts after all the ordinary resources of the bank have been exhausted, and they ought not to be prosecuted without due regard to the circumstances of the case. The determination on the part of those charged with winding up the affairs of the bank, to resort to this ultimate remedy, requires the exercise of due consideration; and a receiver ought not to take it upon himself to decide so important a question without reference to the comptroller under whose direction he acts. Although it is his duty to collect the assets of the institution he does not distribute them, and cannot ordinarily know, without reference to the comptroller, whether a prosecution of the stockholders will be necessary or not. Hence our decision in the case of Kennedy v. Gibson cannot fairly be quoted for the government of a case like the present, which is a suit to recover an ordinary debt.
The language of the statute authorizing the appointment of a receiver to act under the direction of the comptroller, means no more than that the receiver shall be subject to the direction of the comptroller. It does not mean that he shall do no act without special instructions. His very appointment makes it his duty to collect the assets and debts of the association. With regard to ordinary assets and debts no special direction is needed; no unusual exercise of judgment is required. They are to be collected of course; that is what the receiver is appointed to do. We think there was no error in the decision of the court below on these points, and that the action was properly brought by the receiver.
We next come to the special ground of litigation in this case.
The cause was tried before a jury, and evidence was adduced pro and con upon the principal subject of controversy, namely, whether the note given by Sherman to the defendants, on the 27th of February, was given on his individual account for a loan made to him personally, or whether it was given on the account of the Merchants' Bank (of which he was cashier) for a loan made to it. We are called upon to decide upon the legality of certain rulings as to evidence which took place during the trial, and upon the correctness of the charge to the jury.
After the plaintiff had proved the presentation of the check on the 1st of May, and the payment of it to the messenger of the Merchants' Bank, in certain moneys and securities, including the note in question; and had proved by Sherman, the cashier of the Merchants' Bank, that the defendants refused to take the note back and pay the cash instead; he proceeded to prove by Sherman the circumstances under which the note had been given to the defendants, the substance of which was, that on the 27th of February he applied to Hutchinson, cashier of the defendants, for a loan to himself of $20,000, to enable him to purchase some stock in the Merchants' Bank, and that this note was given for that loan, with the certificate of the stock attached as collateral; and that he received therefor two drafts for $10,000 each on Baltimore and Philadelphia banks, payable to C. A. Sherman, cashier; that he indorsed them as cashier, and that the proceeds, when paid, went to the credit of the Merchants' Bank. The trafts being produced in evidence, the plaintiff's counsel then asked the witness what took place, when the drafts were about to be drawn, between him and Hutchinson in regard to the form of the drafts. This evidence was objected to, was allowed, and an exception taken, which is the subject of the third assignment of error.
It is argued by the counsel for plaintiffs in error that this evidence was calculated to explain or vary the legal effect of the drafts themselves. We do not think so. Those drafts are not sued on in this action. They are...
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