From the facts of this case it was held that the intent of a
national bank, after it was insolvent, to prefer a creditor by a
transfer of assets in violation of § 5242 of the Revised Statutes
was a necessary conclusion; that if any other verdict than one for
the plaintiff in a suit at law by the receiver of the bank to
recover the value of the assets from the creditor had been rendered
by the jury, it would have been the duty of the court to set it
aside, and that it was proper to direct a verdict for the
plaintiff.
The meaning of § 5242 is not different from the meaning of § 52
of the Act of June 3, 1864, c. 106, 13 Stat. 115.
It is sufficient under § 5242 to invalidate such a transfer that
it is made in contemplation of insolvency, and either with a view
on the part of the back to prevent the application of its assets in
the manner prescribed by chapter 4 of title 62 of the Revised
Statutes or with a view on its part to the preference of one
creditor to another, and it is not necessary to such invalidity
that there should be such view on the part of the creditor in
receiving the transfer, or any knowledge or suspicion on his part
at the time, that the debtor is insolvent or contemplates
insolvency.
The case is stated in the opinion.
MR. JUSTICE BLATCHFORD delivered the opinion of the Court.
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
Page 129 U. S. 224
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"
"$11,008 20/100 BOSTON, May 22, 1882"
"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 endorsed."
"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
Page 129 U. S. 225
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
endorsed, 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."
"$10,000 BOSTON, May 13, 1882"
"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 endorsed."
"No. 2513 E. C. WHITNEY,
Cashier"
"[Countersigned] G. H. BENYON,
Teller"
Page 129 U. S. 226
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 F. 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 §
5242 of the Revised Statutes. That § 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 § 52
of the Act of June 3, 1864, c. 106, 13 Stat. 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 § 5242 the word "made,"
not found in § 52 of the act of 1864.
Page 129 U. S. 227
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 until they were
carried out:"
"Voted to go into liquidation; voted that the bank be closed to
business; voted that Lewis Coleman, president, Micah Dyer, Jr.,
Andrew F. Reed, directors, and William J. Best, be and hereby are
appointed a committee to proceed to Washington to confer with the
Hon. John J. Knox, Comptroller of the Currency, as to the measures
proper to be taken in the present situation; that if the
Comptroller shall deem it necessary to appoint a receiver, the
directors unanimously recommend for that position Mr. E. C.
Whitney, who since March 18th has discharged the duties of cashier
with great ability, diligence, and energy, and who is perfectly
familiar with the assets, liabilities, and affairs of the bank and
thoroughly understands the steps necessary to be taken to speedily
and profitably realize upon the estate to the fullest extent; that
if Mr. E. C. Whitney shall be appointed receiver of the bank, the
directors will furnish satisfactory bonds for the faithful
discharge of his duties to any amount which the Comptroller may
require."
"And the bank never after did any business except so far as
appears in this bill. The committee of the directors went to
Washington on Saturday night, and on Monday, May 22d, saw the
Comptroller, who appointed the plaintiff receiver about ten o'clock
A.M., and the plaintiff left Washington on Monday, and on the
following day arrived in Boston, and took possession of the bank.
For some time before this, and ever since the resuscitation
Page 129 U. S. 228
of the bank after its first failure, the Pacific Bank, not being
a member of the Boston clearing house, had been in the habit daily
of depositing with the defendant all checks received by the Pacific
Bank, to be collected through the clearing house by the defendant,
with which the Pacific Bank was credited as a depositor, and
against which it drew."
"On Monday morning, May 22d Whitney, the cashier of the Pacific
Bank, received by mail, as usual, many letters enclosing drafts and
checks, and sent all these checks and drafts, amounting to
$10,967.95, to the defendant bank, where they were received and
forthwith sent to the clearing house with other checks to be
cleared by defendant."
"The messenger who carried the checks to the defendant took at
the same time and presented to the defendant a check drawn by
Whitney for $11,008.20, being the whole amount of the checks then
deposited, and $40.25 already to the credit of the Pacific Bank on
its current deposit account with the defendant."
"The defendant's paying teller at the messenger's request, gave
him the defendant's negotiable certificate of deposit, payable on
demand, for the said sum of $11,008.20. The defendant at that time
held the negotiable certificate of deposit of the Pacific Bank,
payable on demand, for $10,000."
The copies of those certificates are hereinbefore set forth.
"These transactions took place as early as half-past nine on the
morning of May 22d, and no officer or the defendant bank then knew
or suspected that the Pacific Bank was insolvent or contemplating
insolvency, or was not doing business as usual, or that its
directors had voted to close it, or that application was to be made
for a receiver, and no application had, in fact at that time been
made to the Comptroller, it being made about 10 A.M. of that
day."
The parties had duly demanded of each other payment of their
respective claims.
The bill of exceptions also states as follows:
"There was other evidence given in the case on both sides, and
particularly on the question whether any, and, if any, what
agreement was afterwards made between Whitney, the cashier of the
Pacific Bank, and Batt, the cashier of the defendant bank, as
Page 129 U. S. 229
to the terms and conditions on which the deposit made on May 22d
as above stated should be held by the defendant, part of this
evidence consisting of a letter from Whitney to Batt."
It then proceeds:
"The defendant requested the judge to submit to the jury the
three following question: first, whether or not there was in fact
any view or intent on the part of the Pacific Bank or any of its
officers to give a preference to the defendant over other creditors
or to prevent the application of the assets of the Pacific Bank in
the manner prescribed in the bank act; second, whether or not any
subsequent agreement was made varying the relation of the two banks
as they existed at the time the checks were deposited; third, if
the jury answer the preceding question in the affirmative, whether
or not such agreement was expressed in Whitney's letter. The
defendant at the same time prayed the judge to give several rulings
on matters of law applicable to the facts as they might be found by
the jury on the above issues. But the judge refused to submit the
above or any questions whatever to the jury or to give any of the
rulings prayed for on the ground that the issues were immaterial,
and that there was no question for the jury, and ruled as matter of
law that on the undisputed facts in the case, the plaintiff was
entitled to recover the amount of the checks and drafts deposited
by the Pacific Bank in defendant's bank on Monday."
The court directed a verdict for the plaintiff for $12,232.88,
that being the amount of the checks and drafts, with interest from
the date of the writ, and the defendant excepted to such rulings
and refusals to rule.
The view taken by the circuit court was that under § 5242, the
transfer or payment by a bank, to be void, must be made after the
commission of an act of insolvency or in contemplation thereof and
with a view to prevent the application of its assets as provided by
law or with a view to giving a preference to one creditor over
another; that the undisputed facts of the case showed that the act
of the cashier could, under the circumstances, have no other
result, if allowed to stand, than to operate as a preference in
favor of the Security
Page 129 U. S. 230
Bank; that the Pacific Bank had decided to close its doors and
go into liquidation; that after that, the necessary consequence of
the transfer was to create a preference; that it could not be said
that the transfer was made with the intention of going on in
business, nor could it be contended that it was made to save the
credit of the bank, and that after the vote of the directors to
close the bank and go into liquidation, any transfer of its assets
to a creditor whereby that creditor secured a preference must be
presumed to be made with an intent to prefer. We concur in this
view of the case.
The directors of the Pacific Bank held a meeting on the
afternoon of Saturday, May 20, 1882, after the regular close of
business for that day, and passed three votes: (1) to go into
liquidation; (2) that the bank be closed to business; (3) that the
president, two directors, and another person be a committee to go
to Washington and confer with the Comptroller of the Currency as to
the measures proper to be taken, and that, if the Comptroller
should deem it necessary to appoint a receiver, the directors
unanimously recommended for that position Mr. Whitney, the cashier,
and that, if he should be appointed receiver, the directors would
furnish satisfactory bonds for his faithful discharge of the duties
to any amount which the Comptroller might require. These votes and
the proposed action the directors purposely kept concealed. The
bank never afterwards did any business except so far as appeared in
the bill of exceptions. The committee of the directors went to
Washington on Saturday night, and on Monday, May 22, 1882, saw the
Comptroller, who appointed Mr. Price to be the receiver, about 10
o'clock A.M., and he left Washington on Monday, and on Tuesday
arrived in Boston and took possession of the bank. Although the
Pacific Bank, not being a member of the Boston clearing house, had
been in the habit of daily depositing the checks received by it
with the defendant to be collected by the latter through the
clearing house, the Pacific Bank being credited as a depositor and
drawing on the Security Bank against the checks, and although it
was in accordance with that custom that Mr. Whitney, the cashier of
the Pacific
Page 129 U. S. 231
Bank, sent the checks and drafts, amounting to $10,967.95, to
the Security Bank on Monday, May 22, 1882, to be cleared by it,
drawing for the $11,008.20 at the time, and receiving in return, on
its own request, from the Security Bank, a negotiable certificate
of deposit of that bank, payable to the order of Mr. Whitney on the
return of the certificate properly endorsed, yet Mr. Whitney knew
at the time of these transactions that the certificate of deposit
for $10,000, given by him to the Security Bank nine days before,
created an indebtedness of the Pacific Bank to the Security Bank
for that amount and was, though negotiable, presumably still held
by that bank. It was in fact still held by it. The natural
presumption was that if the certificate were still held by the
Security Bank, that bank would, as soon as it should learn that the
Pacific Bank was closed to business, seek to retain out of the
collections the amount of such certificate, and apply that amount
to its payment.
It is sufficient under § 5242 of the Revised Statutes to
invalidate such a transfer that it is made in contemplation of
insolvency, and either with a view to prevent the application of
the assets of the bank in the manner prescribed by chapter 4, Title
62 of the Revised Statutes or with a view to the preference of one
creditor to another. Certainly the transfer in question was made in
contemplation of insolvency, made as it was after the directors had
voted that the bank should go into liquidation and should be closed
to business, and that a receiver should be appointed, and is was
made with a view, on the part of the Pacific Bank and of its
cashier, who represented it and acted for it in this transfer of
its assets, to prevent the application of its assets in the manner
prescribed by such chapter 4 of title 62, and with a view to prefer
the Security Bank to other creditors. The transaction, if allowed
to stand, could result in nothing else. The statute made it void,
although there was no such view on the part of the Security Bank in
receiving the transfer of the assets and although there was no
knowledge or suspicion at that time on the part of the Security
Bank that the Pacific Bank was insolvent, or contemplated
insolvency, or was not doing business,
Page 129 U. S. 232
or that its directors had voted to close it, or that application
was to be made for a receiver, and although the transfer took place
before the application was actually made to the Comptroller for the
appointment of a receiver.
There was no question of fact to be submitted to a jury. From
the facts proved, the intent to prefer on the part of the Pacific
Bank was a necessary conclusion, and it was correct in the district
court to direct a verdict for the plaintiff. If any other verdict,
on the facts proved, had been rendered, it would have been the duty
of that court to set it aside.
Nor was there any error on the part of the district court in
refusing to submit to the jury the second and third questions which
the defendant requested the judge to submit to them. The bill of
exceptions does not set forth what the "other evidence" given in
the case was in regard to any subsequent agreement between the
cashiers of the two banks as to the holding of the deposit by the
Security Bank. The court ruled that the issues involved in such
second and third questions were immaterial, and this Court cannot
hold otherwise, on the facts set forth in the bill of exceptions.
"Any subsequent agreement" must have been made after the receiver
had been actually appointed, and could not affect his rights.
The defendant objects that the rulings of the district court
were made, and the verdict and judgment were rendered generally, on
the plaintiff's declaration of three counts, and that the first
count, which seeks to recover back the money deposited as an
unlawful payment, is inconsistent with the second count, which
seeks to recover on the certificate of deposit as a valid
instrument.
It is a sufficient answer to this contention to say that no
objection was made to the declaration by way of demurrer or
otherwise at the trial or before, and no ruling on the subject was
asked for at the trial, or was made the subject of an exception. No
objection or exception was taken to the verdict, nor did the
defendant request at the trial that the plaintiff should elect on
which count he would ask a verdict, nor did the defendant request
the court to ask the jury to state on which count of the
declaration the verdict was rendered.
Page 129 U. S. 233
We see no inconsistency between the first and second counts of
the declaration. They were in substance for the same cause of
action, and the first count is clearly sufficient to support the
verdict.
Judgment affirmed.