Schrader v. Manufacturers Nat Bank of Chicago

• Court: U.S. Supreme Court
• Writing for the Court: BLATCHFORD; FULLER
• Citation: Schrader v. Manufacturers Nat Bank of Chicago, 133 U.S. 67, 10 S.Ct. 238, 33 L.Ed. 564 (1890)
• Decision Date: 20 January 1890
• Parties: SCHRADER v. MANUFACTURERS' NAT. BANK OF CHICAGO et al. 1

133 U.S. 67

10 S.Ct. 238

33 L.Ed. 564

SCHRADER v. MANUFACTURERS' NAT. BANK OF CHICAGO et al.¹

January 20, 1890.

F. A. McConaughy, for appellant.

Harvey B. Hurd and Henry G. Miller, for appellees.

BLATCHFORD, J.

This is a case growing out of that of Richmond v. Irons, 121 U. S. 27, 7 Sup. Ct. Rep. 788, and involves a claim against the assets of the Manfacturers' National Bank of Chicago. In the suit of Irons against that bank, by an order of the circuit court of the United States for the northern district of Illinois, one Harvey was appointed receiver of the bank. That court, on July 23, 1883, referred it to a master, to report the amount of the debts of the bank, the value of its assets, and the amount of assessment necessary to be made on each share of its capital stock in order to pay its debts. Among the claims presented before the master was that of the assignee of the People's Bank of Bellville, Ill., who claimed to be a creditor in the sum of $84,103.48; and the master reported in favor of the claim. It was based on a judgment for $67,277 obtained in the same circuit court, May 31, 1880, by the People's Bank against the Manufacturers' Bank. The judgment was founded on eight promissory notes for $5,000 each, dated August 5, 1873, made by Henry E. Picket, payable one year after date, to the order of Picket, at the Manufacturers' Bank, with interest at 10 per cent. per annum, payable semi-annually, and with 10 per cent. per annum interest after maturity, indorsed by Picket; the payment of each note, principal and interest, at maturity, being guarantied by the Manufacturers' Bank. The notes were secured by a trust-deed on real estate made by Picket to one Joseph A. Holmes. On the 1st of June, 1886, the circuit court made a decree directing various shareholders to pay to the receiver, for the benefit of the creditors of the bank, certain sums of money. An appeal was taken to this court by several of the stockholders, and was heard, and is the case reported as Richmond v. Irons, 121 U. S. 27, 7 Sup. Ct. Rep. 788. The decision was announced March 28 1887. The decree of the circuit court was reversed, and the cause remanded, with directions to proceed in conformity with the opinion of this court. After that decision, and before the mandate was presented to the circuit court, and on the 20th of June, 1887, on the application of several of the stockholders, the case was referred back to the master, to report again upon the amount of the debts due by the bank, and upon the amount of the assessment necessary to be made on each share of its capital stock to pay its debts, and upon the amount payable by each shareholder on such assessment, and also to take further proofs in regard to the validity of the claim of the People's Bank, as against the stockholders of the Manufacturers' Bank, and as to whether that claim had been in whole or in part released, discharged, or defeated by reason of any new matters stated in such application. On the 16th of June, 1888, the master reported that the claim of the People's Bank ought to be disallowed upon the new proofs taken. Those proofs accompanied his report. The assignee of the People's Bank excepted to the report, and the matter was heard before Judge BLODGETT. His opinion is reported in 36 Fed. Rep. 843. He confirmed the report and overruled the exceptions, and on the 27th of March, 1889, a decree was entered, upon the mandate of this court, vacating the decree of June 1, 1886, giving a list of the valid outstanding claims against the bank, which did not include the claim of the assignee of the People's Bank, adjudging what sums were to be paid by the various stockholders, and taxing costs to the amount of $158.60 against the People's Bank and its assignee. The assignee appealed to this court from the decree, because it disallowed his claim, and because of the award of costs against the People's Bank and its assignee. The Manufacturers' Bank became insolvent and suspended payment on September 23, 1873, and, in pursuance of the national banking act, went into voluntary liquidation on September 26, 1873.

In regard to the claim of the assignee of the People's Bank, the master reported as follows: 'I find and report that the claim of the assignee of the People's Bank of Belleville is based upon the guaranty of the Manufacturers' National Bank of promissory notes made by Henry E. Picket, and secured by real estate, amounting in the outset to $50,000; that this guaranty was made by Ira Holmes, who was an officer of said Manufacturers' National Bank, and before the failure of the bank; that these notes were secured by a trust-deed to Joseph A. Holmes upon the undivided half of the north-west quarter of section ten, township thirty-seven north, range fourteen east, being (80) eighty acres, one undivided half of which eighty acres was owned by said Picket, and a five-acre tract and twenty-six lots, and the other undivided half of said eighty acres by said Ira Holmes individually; that after the maturity of these notes, and in the month of August, A. D. 1874, Ira Holmes made a written contract with the People's Bank, by which he was to give and did give the bank his promissory notes, aggregating the sum of $87,465, to secure the Picket notes, and other indebtedness for which the bank was not liable, payable in one, two, three, and four years, securing the payment thereof by a trust-deed upon said property and the south-west quarter of said north-west quarter, containing forty acres additional; and that subsequently foreclosure proceedings were had upon the trust-deed made by Picket, resulting in the placing of the title to the entire tract in the name of said Ira Holmes, and the amount for which the property was sold, to-wit, the sum of ten thousand dollars, was credited upon the notes of said Picket, leaving due at that time upon the Picket notes the sum of forty thousand dollars, for the payment of which, and the notes of said Ira Holmes, the entire tract remained charged, said Picket having for the purpose of enabling the parties to carry our the arrangement referred to, executed a quitclaim deed of his interest in said property to said Ira Holmes. I find, as a matter of fact, that the consideration for the conveyance of said Picket was his release from the payment of his notes, which were thereafter held under the terms of the contract between Ira Holmes and the People's Bank, for the purpose of preserving the guaranty of the bank; that said arrangement changed the original contract of guaranty made by the Manufacturers' National Bank, by the taking of the new security and the extension of time resulting therefrom upon the original indebtedness. I find, further, that the deed executed by said Picket, as the result of the agreement referred o, was made under an arrangement between said Holmes and Picket, and assented to by said People's Bank of Belleville, that said Picket was to be released and discharged from any further liability or payment upon the original indebtedness. By reason of which I find that the Manufacturers' National Bank, the original guarantor, became discharged from all further liability on account of such undertaking of guaranty, and recommend that the claim against it be disallowed.'

Judge BLODGETT, in his opinion in 36 Fed. Rep. 843, said: 'This claim of the People's Bank of Belleville is based upon a guaranty of payment made by the Manufacturers' National Bank of eight notes of $5,000 each, given by Henry E. Picket, dated August 5, 1873, and due in one year from date, which were discounted for the Manufacturers' National Bank, soon after their date, by the People's Bank of Belleville. These notes were secured by a trust-deed upon land in the vicinity of the city of Chicago. The Manufacturers' National Bank suspended payment and went into voluntary liquidation on or about the 23d of September, 1873, and, when these notes matured, about a year afterwards, dealings were had between the People's Bank of Belleville and Ira Holmes, then acting as president of the Manufacturers' National Bank, in liquidation, and assuming to act also for his bank, by which the title to the real estate held as security for the payment of these notes was...