Montgomery v. Chemical Nat. Bank of New York

• Decision Date: 07 June 1923
• Docket Number: 3 Div. 601.
• Citation: 209 Ala. 585,96 So. 898
• Parties: MONTGOMERY, STATE SUPERINTENDENT OF BANKS v. CHEMICAL NAT. BANK OF NEW YORK.
• Court: Alabama Supreme Court

96 So. 898

209 Ala. 585

MONTGOMERY, STATE SUPERINTENDENT OF BANKS v. CHEMICAL NAT. BANK OF NEW YORK.

3 Div. 601.

Supreme Court of Alabama

June 7, 1923

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Bill by the Chemical National Bank of New York against H. H Montgomery, as State Superintendent of Banks. From a decree overruling demurrer to the bill, respondent appeals. Reversed and remanded.

Steiner Crum & Weil and Horace Stringfellow, all of Montgomery, for appellant.

Rushton Crenshaw & Rushton, of Montgomery, for appellee.

SAYRE J.

The Chemical National Bank of New York filed this bill, averring in substance that, in pursuance of an agreement with the Merchants' Bank of Montgomery, complainant accepted four drafts, aggregating $100,000, drawn against it by the Hall-Beale Cotton Company, and credited the proceeds to the Merchants' Bank, which used them in its business. These drafts were secured by the pledge of 1,185 bales of cotton stored in warehouses in Montgomery, the Merchants' Bank retaining the warehouse receipts. Through the negligence of the Merchants' Bank the Hall-Beale Cotton Company procured the receipts and wrongfully converted the cotton to its own use. Later the Merchants' Bank represented to the Chemical Bank that its whole indebtedness on account of the transaction with the Hall-Beale Company was larger than it could carry, and proposed that, if the Chemical Bank would reduce the indebtedness by splitting it into two parts, it (the Merchants' Bank) would remain liable for $33,780 and would furnish good indorsers for the balance, then to wit, $60,000, and represented that W. L. Lancaster, John R. Gamble, John H. Gaddis, and B. L. Gaddis, the proposed indorsers, were men of large means, worth $176,000 over and above their liabilities; that, relying upon these representations, complainant entered into the proposed arrangement, but later learned that the representations so made to it concerning the solvency of the said indorsers were false and fraudulent and that said indorsers had no property whatever available for the payment of the debt of $60,000; that complainant had duly filed its claim with defendant as state superintendent of banks having in charge the liquidation of the affairs of the Merchants' Bank, and that said superintendent had rejected the claim. The prayer was that complainant's claim for the amount of the indebtedness of the Merchants' Bank be allowed and that complainant be decreed to be entitled to dividends in the same proportion as other creditors, etc. The trial court overruled defendant's demurrer, and this appeal is taken to test the correctness of that ruling.

Appellant's contention is that, since the Banking Act required the Merchants' Bank to make good any impairment of its capital, when appellee made good the shortage for it appellee's devotion of its funds to that end was irrevocable, and cites Wright v. Gurley, 133 La. 745, 63 So. 310, a...