The several payments and remittances made to the Chemical Bank
by the Capital Bank before its insolvency were not made in
contemplation of insolvency, or with a view to prefer the Chemical
Bank.
These cheques and remittances were not casual, but were plainly
made under a general agreement that remittances were to be made by
mail, and that their proceeds were not to be returned to the
Capital Bank, but were to be credited to its constantly overdrawn
account, and when letters containing them were deposited in the
post office, such mailing was a delivery to the Chemical Bank,
whose property therein was not destroyed or impaired by the
insolvency of the Capital Bank, taking place after the mailing and
before the delivery of the letters containing the remittances.
In January, 1896, Kent K. Hayden, as the duly appointed receiver
of the Capital National Bank of Lincoln, Nebraska, filed in the
Circuit Court of the United States for the Southern District of New
York a bill of complaint against the Chemical National Bank of New
York.
Page 174 U. S. 611
The bill alleged that the Capital National Bank, on the 21st day
of January, 1893, was insolvent and stopped doing business, and
that, on the 22d day of January, 1893, the Comptroller of the
Currency closed said bank and took possession of its assets and
affairs; that for a period long prior to the 15th day of January,
1893, the said bank was insolvent, and its insolvency was known to
all its officers; that ever since the second day of June, 1884,
there had been mutual and extensive dealings between the two banks
above named in which each had acted for the other, as correspondent
banks do, for the making of collections and the crediting of the
proceeds thereof; that the Capital National Bank kept an active
deposit account with the defendant, and that settlements on the
basis of such accounts were made at periodic times during all said
period, and any balance after the correction of errors, mutually
agreed to be charged or credited, was at such periods credited or
debited, as the fact might be, upon the books of each of said banks
to a new account, and the prior accounts thereby and in that manner
adjusted and settled.
That the defendant bank had refused to pay or honor the drafts
drawn upon it by the Capital National Bank presented on or since
January 21, 1893; that, since January 22, 1893, the defendant bank
had received many and large sums of money belonging to, and for the
account of, the Capital National Bank, some of it being the sums of
$2,935.60, $815.79, and $735, from the officers of the Capital
National Bank, and the rest from the third parties which remitted
the same to the defendant for account of the Capital National Bank,
and that, in particular, it had received on January 23, 1893,
$5,000 from the Packers' National Bank, and $2,000 from the
Schuster Hax National Bank, and divers other sums from others, on
that day and since; that the defendant had refused to account for
and pay over to the complainant the said collections. Wherefore it
was prayed that an accounting be had, and that the defendant be
ordered to pay over what might be thereby found due.
The defendant bank answered, admitting the preliminary
allegations of the bill but denying its knowledge of the
Page 174 U. S. 612
insolvency of the Capital National Bank on or prior to January
21, 1893, but averring that, up to the 23d day of January, 1893, it
was informed and did believe that the said Capital National Bank
was entirely solvent, and dealt with it and gave it credit as a
solvent bank.
The answer denied that on and after January 21, 1893, it had
ceased to pay and refused to pay all drafts drawn upon the
defendant by the Capital National Bank, but admitted that on the
23d day of January, 1893, because of information then for the first
time received of the struggling condition of said bank, the
defendant bank did refuse to pay the drafts of the Capital National
Bank, which was then indebted to the defendant in the sum of at
least $13,992.93 on balance of account, besides large amounts of
negotiable paper, indorsed by the Capital National Bank, then held
by and previously purchased or discounted by the defendant bank,
and the proceeds of which had been credited to the account of the
Capital National Bank, all of which transactions were averred to
have been made in the usual course of business between the banks,
and without any knowledge, notice, or belief on the part of the
defendant bank that the Capital National Bank was insolvent or in
any danger of becoming so.
The answer denied that the defendant had, since January 22,
1893, received many and large sums of money belonging to and for
account of the Capital National Bank, but admitted that since
January 21, 1893, it had received certain remittances and payments,
in the form of checks or drafts, for account of the Capital
National Bank, all which it had placed to the credit of the Capital
National Bank, which had left the Capital National Bank indebted to
the defendant bank in a large sum in the form of balance of account
and negotiable paper indorsed to the defendant by the Capital
National Bank, and the answer alleged on information and belief
that said remittances and payments were made by the Capital
National Bank, or by other banks and bankers by the direction and
order of said Capital National Bank, through the United States
mails, and were so ordered, made, and remitted
Page 174 U. S. 613
before the appointment of any receiver for said Capital National
Bank and before it ceased to pay its obligations or had suspended
its usual and ordinary banking business, and that said remittances
by said Capital National Bank, or by other banks and bankers, by it
ordered to be made to the defendant, were made in the ordinary and
accustomed course of business between the defendant and the
National Capital Bank, and, when received by the defendant, were by
it placed to the credit of the Capital National Bank.
The answer admitted that it had received the sums of $2,935.60,
$815.79, $735, $5,000, and $2,000 on the 23d day of January, 1893;
that the said sums of $2,935.60 and $815.79 were remitted to the
defendant on or about the 19th day of January, 1893, and the said
sum of $735 on or about the 20th day of January, 1893, by the said
Capital National Bank, which on said respective days deposited and
delivered the same in the United States mail, in letters addressed
to the defendant, in the usual and accustomed course of business,
and before said Capital National Bank had suspended payment or
stopped business, and before it was taken charge of by the
receiver; that the said sum of $5,000 was remitted to the defendant
on or about the 19th day of January, 1893, by the Packers' National
Bank, and the said sum of $2,000 was remitted to this defendant by
the Schuster National Bank on or about January 19, 1893, by being
by said banks, respectively, deposited in the United States mail,
in letters addressed to the defendant, in the usual course of
business, and before the Capital National Bank suspended payment or
stopped business, and before it was taken charge of by the
receiver. And the answer alleged on information and belief that
said remittances to it by the Packers' National Bank and the
Schuster National Bank, respectively, were made in virtue of orders
and directions previously given to them by said Capital National
Bank on or about January 18, 1893, in the usual course of business
between them and the Capital National Bank.
A replication was filed and evidence put in on behalf of the
respective parties. It was stipulated that the Capital National
Page 174 U. S. 614
Bank continued to transact the usual and ordinary business of a
national bank up to the close of banking hours on January 21, 1893;
that the ordinary mail time between Lincoln, Nebraska, and the City
of New York is fifty hours; between Lincoln and South Omaha,
Nebraska, where the Packers' National Bank is situated, is two
hours and forty minutes; between South Omaha and New York City,
forty-eight hours and thirty-seven minutes; between Lincoln and St.
Joseph, Missouri, where the Schuster Hax National Bank is located,
is seven hours and twenty-eight minutes, and between St. Joseph and
New York City is fifty hours and fifty-five minutes. The
complainant put in evidence an account or statement, furnished by
the defendant to the complainant, showing the transactions between
the Capital National Bank and the Chemical National Bank from
January 3, 1893, to January 27, 1893, showing a balance on the last
day of $13,317.94, against the Capital National Bank and in favor
of the Chemical National Bank.
The complainant likewise put in evidence a draft drawn on
January 13, 1893, by the Capital National Bank on the Chemical
National Bank for $5,000, to the order of T. M. Barlow, cashier,
and a protest of said draft for nonpayment on January 17, 1893;
also, a statement of various drafts drawn by the Capital National
Bank on the Chemical National Bank at different times, in favor of
third parties, and protested for nonpayment on and after January
24, 1893. These protested drafts amounted to $44,264.66.
The defendant called as a witness its cashier, William I.
Quinlan, who testified that when the draft for $5,000 to the order
of T. M. Barlow, cashier, was presented and payment refused, the
Capital National Bank had no deposits or funds on deposit with the
Chemical National Bank out of which such draft could be paid, and
that the account of the Capital National Bank had been overdrawn
for some time. The defendant put in evidence a letter dated January
19, 1893, from the Packers' National Bank, enclosing its draft for
$5,000 on the Fourth National Bank of New York, to be placed to the
credit of the Capital National Bank, and letter, dated January
Page 174 U. S. 615
18, 1893, from the Schuster Hax National Bank, enclosing its
draft for $2,000 on the Chemical National Bank, to the credit of
the account of the Capital National Bank.
Further evidence was put in by the respective parties which it
does not seem necessary to state.
On March 16, 1897, after argument, upon the pleadings and
proofs, the circuit court dismissed the bill of complaint, with
costs. An appeal was taken from this decree to the Circuit Court of
Appeals for the Second Circuit, and on January 31, 1898, that court
affirmed the decree of the circuit court. 84 F. 874. And from the
decree of the circuit court of appeals, an appeal was taken and
allowed to this Court.
MR. JUSTICE SHIRAS, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The Capital National Bank of Lincoln, Nebraska, was organized as
a banking association under the laws of the United States in June,
1884, and continued to transact the usual and ordinary business of
a national bank up to the close of banking hours on January 21,
1893. On January 22, 1893, a bank examiner took possession, and
thereafter, about February 6, 1893, a receiver was duly
appointed.
The Chemical National Bank of New York, a banking association
organized under the laws of the United States and doing business as
such in the City of New York, carried on for some years a large
business intercourse with the Capital National Bank.
The receiver filed the bill in this case seeking to make the
Chemical National Bank account for certain moneys received by it
after the suspension of the Capital National Bank.
The nature of the intercourse between the two banks was thus
described in a paragraph of the bill:
Page 174 U. S. 616
"Ever since the second day of June, 1884, there have been mutual
and extensive dealings between the two banking associations above
named, in which each was acting for the other, as correspondent
banks do, for the making of collections, and the crediting of the
proceeds thereof, and transmitting accounts of the same, including
costs of protest and other expenses, and the Capital National Bank
also kept an active deposit account with the defendant, and that
settlements on the basis of such accounts were made at periodic
times during all said period, and any balance, after the correction
of errors, mutually agreed to be charged or credited, was at such
periods credited or debited, as the fact might be, upon the books
of each of said banks, to a new account, and the prior accounts
thereby and in that manner adjusted and settled."
The complainant's case depends, under the evidence, on an
application of the provisions of section 5242 of the Revised
Statutes, which is 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, and no attachment, injunction or execution shall be issued
against such association or its property before final judgment in
any suit, action or proceeding in any state, county or municipal
court."
It appears in evidence that on January 18, 1893, the account of
the Capital National Bank with the defendant bank was overdrawn to
the amount of $84,486.19, and that, by sundry remittances made, the
amount overdrawn stood, on January 21, 1893 at the sum of
$25,515.32. It further appears that on January 18, 1893, the
Schuster Hax National Bank of St.
Page 174 U. S. 617
Joseph, Missouri, remitted by mail $2,000 to the defendant for
the credit of the Capital National Bank; on January 19, the
Packers' National Bank of South Omaha, Nebraska, remitted by mail
to the defendant $5,000 for the credit and advice of the Capital
National Bank; on January 20, the Capital National Bank remitted to
the defendant by mail a package of small items amounting to $735,
and a package amounting to $2,935.60, and on the 21st, a similar
package amounting to $833.64. On January 23, the defendant received
the remittance of $2,000 of the 18th, and of $5,000, $815.79, and
$2,935.60 of the 19th, and of the remittance of $735 of the 20th,
and on the 24th of January it received the remittance of $833.04.
With these remittances credited, the account of the Capital
National Bank stood, on January 24, 1893, overdrawn $13,317.94.
The claim of the complainant is to recover all the sums received
by the defendant bank on January 23 and 24, as having been
transferred and received contrary to the statute. The bill of
complaint contains no allegation of any act of insolvency prior to
January 22, 1893, or of any payment made in contemplation of
insolvency, or of any payment made with a view to prevent the
application of the bank's assets in the manner prescribed in the
statute, or of any payment made with a view to the preference of
one creditor to another.
It is true that in the course of the trial it appeared that, on
the 17th day of January, 1893, the Chemical National Bank refused
to pay a check for $5,000 drawn on it by the Capital National Bank
to the order of T. M. Barlow, and it is contended that such refusal
by the Chemical National Bank is to be regarded as an act of
insolvency on the part of the Capital National Bank. It is
difficult to see any foundation for this contention in the mere
fact that the Chemical National Bank refused on January 17 to make
further advances on the credit of the Capital National Bank. Such
refusal may have been occasioned by a shortage of money on the part
of the bank in New York, and because its funds on that day were
needed for other purposes, and was entirely consistent with the
absolute solvency of the Nebraska bank.
Page 174 U. S. 618
Nor can a finding that the payments and remittances made to the
Chemical National Bank on the dates above mentioned were made in
contemplation of insolvency, and with an intent to prefer that
bank, be based on the mere allegation that the Capital National
Bank was actually insolvent, and that its insolvency must have been
known to its officers. It is matter of common knowledge that banks
and other corporations continue in many instances to do their
regular and ordinary business for long periods though in a
condition of actual insolvency as disclosed by subsequent events.
It cannot surely be said that all payments made in the due course
of business in such cases are to be deemed to be made in
contemplation of insolvency, or with a view to prefer one creditor
to another. There is often the hope that, if only the credit of the
bank can be kept up by continuing its ordinary business and by
avoiding any act of insolvency, affairs may take a favorable turn,
and thus suspension of payments and of business be avoided.
In the present instance, there was not only no allegation of
payments made in contemplation of insolvency or with a view to
prefer the Chemical National Bank, but there was no evidence that,
up to the closing hours of January 21, 1893, the Capital National
Bank had failed to pay any depositor on demand, or had not met at
maturity all its obligations. And the evidence fails to disclose
any intention or expectation on the part of its officers to
presently suspend business. It rather shows that up to the last,
the operations of the bank and its transactions with the Chemical
National Bank were conducted in the usual manner. It may be that
those of its officers who knew its real condition must have dreaded
an ultimate catastrophe, but there is nothing to justify the
inference that the particular payments in question were made in
contemplation of insolvency or with a view to prefer the defendant
bank. The Chemical National Bank was no more preferred by these
remittances several days before suspension than were the depositors
whose checks were paid an hour before the doors were closed.
Indeed, it is stipulated that the Capital National Bank continued
to transact its usual and ordinary business up to the close of
banking hours on January 21, 1893.
Page 174 U. S. 619
The view of the courts below was that these payments and
remittances were not made in contemplation of insolvency or with a
view to prefer the Chemical National Bank, and our examination of
the evidence has led us to the same conclusion.
It remains to consider another proposition very strongly pressed
on behalf of the appellant, and that is that the moneys and checks
remitted to the defendant bank which did not reach it till after
the bank examiner had taken possession could not, in law, become
the property of the defendant bank, but remained part of the assets
of the insolvent bank, for which the defendant must account to the
receiver in order that the proceeds may be ratably divided among
the creditors.
It is said that the taking possession of the bank by the
Comptroller of the Currency is a distinct declaration of
insolvency, and cases are cited in which it has been said by this
Court that the business of the bank must stop when insolvency is
declared,
White v. Knox, 111 U. S. 784, and
that the state of case where the claim sought to be offset is
acquired after the act of insolvency cannot sustain such a
transfer, because the rights of the parties become fixed as of that
time,
Scott v. Armstrong, 146 U.
S. 499.
The law is doubtless as thus stated, but does it apply to the
present case?
It is conceded in his brief by the learned counsel of the
appellee that, if the drafts and checks had been deposited in the
mail pursuant to any agreement, or even if the defendant had known
anything about them, they might have been regarded as the property
of the Chemical National Bank as of the date of mailing. But he
urges that this was only the case of a bank sending the checks of
other parties to its agents for collection and deposit; that it
could have sent them to any other agent, had it pleased, and that,
after it had once put them in the mail, it could have taken them
out again. And queries are put as to which bank would have suffered
the loss if the checks had been destroyed in transit, or if they
had proved to be worthless.
But here we have the case not of a casual remittance, but of
remittances sent from time to time, and frequently, during a
Page 174 U. S. 620
long course of business between the banks concerned. There may
have been no special agreement as to each particular remittance,
but there was plainly a general agreement that remittances were to
be made by mail, and that their proceeds were not to be returned to
the Capital National Bank, but were to be credited to its
constantly overdrawn account.
Whose the loss might be if the packages were destroyed
in
transitu or if the checks proved uncollectible are not
questions that concern us now. It is sufficient for present
purposes to say that the inference is warranted that it was
understood between the parties that these remittances were to be
made through the mails, and that they were in the nature of
payments on general account.
Nor can it be conceded that, except on some extraordinary
occasion and on evidence satisfactory to the post office
authorities, a letter once mailed can be withdrawn by the party who
mailed it. When letters are placed in a post office, they are
within the legal custody of the officers of the government, and it
is the duty of postmasters to deliver them to the persons to whom
they are addressed.
United States v. Pond, 2 Curtis C.C.
265;
Buck v. Chapin, 99 Mass. 594;
Morgan v.
Richardson, 13 Allen 410;
Taylor v. Merchants' Fire Ins.
Co., 9 How. 390.
However, it is not pretended in this case that the checks were
destroyed or proved worthless, or that the Capital National Bank
either withdrew the remittances or countermanded their
delivery.
We think that the courts below well held that, under the facts
of this case, the mailing of these checks and remittances was a
delivery to the Chemical National Bank, whose property therein was
not destroyed or impaired by a subsequent act of bankruptcy.
It is finally urged that, however it may be as to the
remittances received through the mail on January 23, 1893, yet that
the payment or remittance of $833.64, received on January 24, was a
payment made after the declaration of insolvency, and must
therefore be accounted for by the defendant bank.
Page 174 U. S. 621
It is claimed that there was no evidence that this remittance
came by mail, and that all there is in the case is the admission by
the defendant bank of its receipt of that sum on January 24,
1893.
But it is to be observed that no mention is made in the bill of
this particular item, though the other litigated items are
specified, and to the latter only was the proof directed. In the
absence of evidence as to any other method of transmission, and in
view of the fact that all the other payments were made by mail, it
would seem to be a reasonable inference that such was the case of
this remittance. The record discloses that the cashier of the
Chemical National Bank testified in the case. He had furnished the
complainant with a statement of the accounts between the banks from
January 3, 1893, to January 24, 1893, including this particular
item, but he was not cross-examined as to his item. Had he been so
examined, a more particular statement in respect to it would have
been, no doubt, elicited. It was apparently assumed that the
history of this payment did not differ from that of the others, and
the effort now made in respect to it seems to be in the nature of
an afterthought, too late to permit an explanation.
Upon the whole case, we are of the opinion that the decree of
the court of appeals was correct, and its decree is accordingly
Affirmed.
MR. JUSTICE WHITE, MR. JUSTICE PECKHAM, and MR. JUSTICE McKENNA
dissented.
