Holmes v. First National Bank of Fall River

• Decision Date: 03 March 1879
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Charles J. Holmes & others v. First National Bank of Fall River

126 Mass. 353

Charles J. Holmes & others v. First National Bank of Fall River

Supreme Court of Massachusetts

March 3, 1879

Argued October 25, 1878 [Syllabus Material] [Syllabus Material] [Syllabus Material]

Bristol. Bill in equity by the trustees in bankruptcy of the estate of Alexander D. Easton and James T. Milne, formerly doing business under the style of Easton & Milne, to compel the conveyance to them of certain shares of stock in two corporations, alleged to have been conveyed by Easton & Milne to the defendant, in fraud of the bankrupt act. Hearing before Ames, J., who ordered a decree to be entered dismissing the bill, and reported the case, for the entry of such decree by the full court as law and justice might require, upon the following facts:

On January 1, 1876, Easton & Milne procured of the defendant a loan of $ 10,000, and gave the defendant therefor their memorandum check on Richardson, Hill & Company, bankers, of Boston, for that amount, merely as evidence of the amount of the loan, and at the same time pledged to the defendant, as collateral security for the loan, the shares of stock in question. The loan was on demand, with the agreement that it should be paid on January 5, and was made in good faith by the parties thereto, the defendant supposing Easton & Milne to be perfectly solvent. The shares of stock were pledged by delivering the certificates representing the same to the defendant, and by Easton & Milne signing a transfer on the back of each certificate, in the following form: "For value received, we hereby sell, transfer and assign to the shares within named, and authorize to make the necessary transfer on the books of the company." The blanks in these transfers were not filled up at the time of depositing the certificates as collateral security, and no transfer was then made on the books of the corporations. Upon the face of the certificates was the following provision: "which shares are transferable only on the books of the company on the surrender of this certificate."

At about ten o'clock in the forenoon of January 5, Easton & Milne sent their clerk to the defendant bank, who paid in cash the interest due on the loan, and offered in payment of the principal Easton & Milne's check on Richardson, Hill & Company, for $ 10,000. The defendant's cashier, supposing this to be good and drawn against funds, took it, and, after stamping the memorandum check as paid, gave it with the shares and stock to the clerk, who took them away in the same condition in which they were when delivered to the defendant. The check, so received by the defendant, was sent forward by the afternoon mail of that day, in the usual course, to its correspondent in Boston, the National Bank of Redemption, for collection.

At about two o'clock on the same day, the treasurer of the Slade Mills, which had a large deposit at Easton & Milne's, drew, at the suggestion of Milne, two checks, as treasurer, upon Easton & Milne, for $ 10,000 each, and received therefor from Easton & Milne their checks for the same amounts on Richardson, Hill & Company, and took also, at Milne's suggestion, one of Richardson, Hill & Company's checks to the defendant bank, and exchanged it for a cashier's check of the defendant bank on the National Bank of Redemption, Boston, and took the other one to the Fall River National Bank, exchanging it in the same way for a cashier's check of that bank, also on the National Bank of Redemption. Both banks had funds at the National Bank of Redemption, and the cashier of each bank supposed the checks of Easton & Milne to be good. The check so received by the defendant was also sent forward in the afternoon of that day to its correspondent in Boston for collection. Milne admitted that, when these checks were drawn, they had not the funds to meet them with Richardson, Hill & Company.

Prior to this transaction, but on the same day, Easton & Milne came to the conclusion that they could not go on without help, and, after the transaction above described, they issued notices to the various banks in Fall River, proposing to them a meeting in the evening of January 5. On receiving this notice, the defendant's cashier, at about five o'clock in the afternoon, for the first time learned that the checks on Richardson, Hill & Company would not be paid on presentation; and, upon the cashier's inquiring of Milne, whether he considered it right to give such a check and take back the securities which had been given upon the loan, Milne agreed to return the securities to the defendant, and did return them in the same envelope, and in the same condition as when taken up by him. The memorandum check was not returned, and nothing was given in place of it.

In the evening of January 5, there was a meeting of the bank officers and Easton & Milne, at which the defendant and five other banks in Fall River were represented. It was stated that Easton & Milne required the sum of $ 100,000 to tide them over their embarrassment, of which $ 60,000 would be needed to meet checks on Richardson, Hill &amp Company, (including the two received by the defendant, and the one received by the Fall River National Bank,) which would be presented the next morning for payment. A long discussion ensued, and it was voted that it was expedient to sustain Easton & Milne in the interest of the credit of Fall River, but there was much discussion as to the manner in which it was to be done. It was finally agreed that the banks should furnish $ 60,000 to meet the checks payable the next day, and in order to help Easton & Milne along; that the defendant on its part, and as its contribution to this purpose, should provide for the payment of its two checks of $ 10,000 each, the Fall River National Bank for its check of $ 10,000, and another bank for checks of Easton & Milne to the amount of $ 2500; that this and other banks, which had no checks of Easton & Milne, should make up the remainder of the $ 60,000, and that...