Citizens Central National Bank of New York v. Ross Appleton

Decision Date21 February 1910
Docket NumberNo. 113,113
Citation216 U.S. 196,30 S.Ct. 364,54 L.Ed. 443
PartiesCITIZENS' CENTRAL NATIONAL BANK OF NEW YORK, Plff. in Err., v. R. ROSS APPLETON, Receiver of the Cooper Exchange Bank
CourtU.S. Supreme Court

Messrs. John A. Garver and James M. Beck for plaintiff in error.

[Argument of Counsel from pages 196-198 intentionally omitted] Messrs. John W. Hutchinson, Jr., Julius M. Mayer, and H. Snowden Marshall for defendant in error.

[Argument of Counsel from pages 198-200 intentionally omitted] Mr. Justice Harlan delivered the opinion of the court:

This action was commenced in the Supreme court of New York by the receiver of the Cooper Exchange Bank, a New York corporation, against the Citizens' Central National Bank of New York, a national bank corporation formed by the consolidation (Rev. Stat. §§ 5220 and 5221, U. S. Comp. Stat. 1901, p. 3503), of the Central National Bank of the city of New York with the National Citizens' Bank of the same city. The action was dismissed on demurrer to the complaint, and that judgment was affirmed in the appellate division. 116 App. Div. 404, 101 N. Y. Supp. 1027. But on writ of error to the highest court of New York, the judgment was reversed (190 N. Y. 417, 83 N. E. 470), and the cause was remitted to the supreme court of that state for judgment in accordance with the opinion of the former court.

The complaint alleges——

That the defendant, the Citizens' Central National Bank of New York, by the consolidation referred to, acquired all the assets and became subject to the liabilities of the Central National Bank of that city.

That on and prior to January 4th, 1904, one Michael Samuels was indebted to the Central National Bank in the sum of $10,000.

That 'at the instance and request of Samuels, trading under the name of Mikael Samuels & Company, and the Central National Bank of the city of New York,' the Cooper Exchange Bank loaned and advanced to the former the sum of $12,000, Samuels executing his written obligation, dated January 4th 1904, to return or repay the same on or before four months after date with interest, and at the same time, the Central National Bank of the city of New York, under seal, executed a written guaranty for the payment of the debt, as follows: 'For and in consideration of $1 and other good and valuable considerations, the Central National Bank of the city of New York hereby guarantees to the Cooper Exchange Bank the payment at maturity of a loan of $12,000, made this day to Mikael Samuels & Company by the Cooper Exchange Bank.'

That previous to the obtaining of said loan of $12,000, Samuels 'agreed with the said Central National Bank to pay to it the said sum of $10,000 of the said $12,000 so obtained, and the said loan was obtained by the said Mikael Samuels and was graranteed by the said Central National Bank in order that the said Central National Bank might obtain the said sum of $10,000, which it did receive and which was owed to it by the said Samuels.'

That previous to the maturity of the loan, namely, on January 30th, 1904, only a few weeks after the loan was made, Samuels was adjudged a bankrupt. And——

That no part of said loan had ever been paid, except $1,000, which was paid April 7th, 1906.

The court of appeals of New York—Cullen, Ch. J., delivering the opinion—held and the counsel for the Cooper Exchange Bank conceded in that court, that no recovery could be had against the guaranteeing bank in excess of the amount actually received by it out of the $12,000 loaned, as above stated. 190 N. Y. 417, 83 N. E. 470. The case being remitted to the inferior state court, judgment was therefor rendered against the defendant only for $10,000, with interest from January 4th, 1904, with costs in all courts.

The plaintiff in error insists that the guaranty given by the Central National Bank to the Cooper Exchange Bank was beyond its power, was in violation of the national banking act, and, therefore, could not be made the foundation of an action against the grarantor bank. But this action need not be regarded as one on the written contract of guaranty, but as based on an implied contract between the Cooper Exchange Bank and the Central National Bank, whereby the latter, under the circumstances disclosed by the record, came under a duty to account to the former for the $10,000 of the $12,000 actually paid to Samuels at its request and on its guaranty. The law would be very impotent to do justice if it could not, under those circumstances, and without violating established legal principles, compel the Central National Bank to recognize and discharge that duty. Samuels owed the Central National Bank $10,000, and—with knowledge, perhaps, of his financial condition—he was put forward by that bank to obtain $12,000 from the Cooper Exchange Bank, so that it could get $10,000 out of that sum, for its own use. The circumstances show that the latter bank would not have loaned the money to Samuels except at the request and on the guaranty of the Central National Bank. All this, it may be observed, occurred under a previous agreement between the Central National Bank and Samuels, that that bank was to have $10,000 of the $12,000 in discharge of its claim upon him. In short, the Central National Bank, by means of the device mentioned, got $10,000 of the money of the Cooper Exchange Bank for its own use, and having used it for its own benefit, it now seeks to avoid liability therefor, upon the ground that it was not allowed by the law of its creation to execute the guaranty in question. We know of no adjudged case that stands in the way of relief being granted as asked by the plaintiff. But there are many that will authorize such relief.

In Logan County Nat. Bank v. Townsend, 139 U. S. 67, 74, 35 L. ed. 107, 110, 11 Sup. Ct. Rep. 496, it appears that a national bank purchased, at a stipulated price, certain municipal bonds, which it agreed to return to the seller upon demand, or replace them at the same or a less price. Demand was subsequently made on the bank to return or replace the bonds according to the agreement. But it failed to do either, and when sued for the value of the bonds it pleaded, as a...

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