National Security Bank v. Butler

• Decision Date: 28 January 1889
• Citation: 32 L.Ed. 682,129 U.S. 223,9 S.Ct. 281
• Parties: NATIONAL SECURITY BANK v. BUTLER. 1
• Court: U.S. Supreme Court

9 S.Ct. 281

129 U.S. 223

32 L.Ed. 682

NATIONAL SECURITY BANK v. BUTLER.¹

January 28, 1889.

J. C. Coombs and Russell Gray, for plaintiff in error.

A. A. Ranney, for defendant in error.

BLATCHFORD, J.

This is an action at law, brought in the district court of the United States for the district of Massachusetts in November, 1882, by the receiver of the Pacific National Bank, a corporation duly organized under the banking laws of the United States, against the National Security Bank, another corporation so organized. The declaration contains three counts. The first count alleges that the Pacific National Bank became insolvent and failed; that the comptroller of the currency, on the 22d of May, 1882, appointed the plaintiff, Linus M. Price, receiver of the same; that the bank stopped business and closed its doors on the 20th of May, 1882, being insolvent and unable to pay its debts; that steps were on that day taken to represent it to said comptroller as insolvent, and to have a receiver appointed to close it up; that it was determined, on the 20th of May, 1882, not to open its doors or carry on business longer; that on that day the Security Bank was owing to the Pacific Bank, in account, as balance on book, $40.25, and the former bank also held against the latter a certificate of deposit for $10,000; that on the 22d of May, 1882, the Pacific Bank, through its cashier, although it was then insolvent and contemplated insolvency, and had then actually failed and stopped business, and taken said steps for the appointment of a receiver, transferred and delivered to the Security Bank certain checks, drafts, bills, and other property, amounting on their face to the sum of $10,967.95, which, with the said $40.25, made the sum of $11,008.20; that the Security Bank thereupon gave to the cashier of the Pacific Bank a certificate of deposit as follows: 'No. 6216. NATIONAL SECURITY BANK, BOSTON, May 22, 1882. $11,008.20. E. C. Whitney, cash., has deposited in this bank eleven thousand and eight 20-100 dollars, payable to the order of himself on the return of this certificate properly indorsed. CHAS. R. BATT, Cashier.' That the Security Bank collected the money upon the said checks, etc.; that the said certificate of deposit came to the hands of the plaintiff as receiver, among the other assets of the Pacific Bank; that on a demand made by him the Security Bank refused to deliver or pay the said property, or its avails, claiming a right to set it off or apply it on the said certificate of deposit for $10,000; that on the 20th of May, 1882, the Pacific Bank was insolvent; that it, and its directors and officers, well knew the same, and contemplated insolvency; that it was in the same condition on the 22d of May, 1882; that the said transfer of property to the Security Bank was in fraud of the creditors of the Pacific Bank, with a view of giving the former bank a preference over other creditors, by having the same operate as a payment of the debt due to the Security Bank by the Pacific Bank, by way of set-off or otherwise; that the said transfer was illegal, and, if allowed to operate as a set-off or payment, would work an unlawful preference; and that the Pacific Bank, and its officers and cashier well knew, when the transfer was made, that the property, or its proceeds, when collected, would or might be availed of for the payment of the debt due the Security Bank, by way of set-off or otherwise, and contemplated the same, or was bound and is presumed by law to have contemplated and intended the same. The second count of the declaration alleges the giving of the certificate of deposit for $11,008.20; that the plaintiff, as receiver, presented to the Security Bank said certificate, duly indorsed, and demanded payment thereof; but that the defendant refused to pay it. The third count alleges that the defendant owes to the plaintiff as receiver, $11,008.20, as and for money had and received by the defendant to the use of the plaintiff. The declaration demands the recovery of $11,008.20, with interest. The defendant filed an answer and a declaration in set-off. The substance of these papers is that the defendant has a claim in set-off against the Pacific Bank for the amount of the certificate of deposit of the latter bank for $10,000, which was as follows: 'THE PACIFIC NATIONAL BANK OF BOSTON, MASS., BOSTON, May 13, 1882. $10,000. This certifies that there has been deposited in this bank ten thousand dollars, payable to the order of Nat. Security Bank, on return of this certificate properly indorsed. No. 2513. E. C. WHITNEY, Cashier. [Countersigned] G. H. BENYON, Teller.'

The plaintiff put in an answer to the defendant's declaration in set-off, making substantially the same averments which are contained in the first count of the plaintiff's declaration. On these issues there was a trial by a jury, which resulted in a verdict for the plaintiff for $12,232.88, and a judgment for him for that amount, with costs. The case was taken to the circuit court by the defendant by a writ of error, and it affirmed the judgment of the district court, with costs. The opinion of the circuit court is reported in 22 Fed. Rep. 697. The plaintiff brought the case to this court by a writ of error, and afterwards Peter Butler, as successor of Price, as receiver, became plaintiff in error.

There was a bill of exceptions taken by the defendant in the district court. It states that the three counts of the plaintiff's declaration were all for the same cause of action, and that the right of action contained in the first count was founded upon section 5242 of the Revised Statutes. That section provides as follows: 'All transfers of the notes, bonds, bills of exchange, or other evidences of debt owing to any national banking association, or of deposits to its credit; all assignments of mortgages, sureties on real estate, or of judgments or decrees in its favor; all deposits of money, bullion, or other valuable thing for its use, or for the use of any of its shareholders or creditors; and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof,—made with a view to prevent the application of its assets in the manner prescribed by this chapter, or with a view to the preference of one creditor to another, except in payment of its circulating notes,—shall be utterly null and void.' That section is incorporated in the Revised Statutes from section 52 of the act of June 3, 1864, c. 106, (13 St. 115) The two sections differ in these respects: The word 'transfer' becomes 'transfers;' the words 'and other' become 'or other;' the words 'any association' become 'any national banking association;' the words 'with a view to prevent' become 'made with a view to prevent;' and the words 'this act' become 'this chapter.' No change was made in the meaning of the statute by inserting in section 5242 the word 'made,' not found in section 52 of the act of 1864.

The bill of exceptions states that it was admitted at the trial that the $40.25 was on deposit in the Security Bank before the commission of any act of insolvency by the Pacific Bank, and that as to so much of the plaintiff's claim the set-off was a good answer. As to the rest of the claim, the following facts were proved or admitted: 'On Saturday, May 20, 1882, the Pacific Bank, which had previously failed in November, 1881, and had afterwards reorganized and done business, being deeply insolvent, its directors held a meeting in the afternoon, after the regular close of business for the day, and passed these votes, which votes and the proposed action the directors purposely kept concealed...