Bank of Bethel v. Pahquioque Bank,
81 U.S. 383 (1871)

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U.S. Supreme Court

Bank of Bethel v. Pahquioque Bank, 81 U.S. 14 Wall. 383 383 (1871)

Bank of Bethel v. Pahquioque Bank

81 U.S. 383


1. A national banking association may be sued in any state, county, or municipal court in the county or city where such association is located, having jurisdiction in similar cases.

2. Such an association does not lose its corporate existence by mere default in paying its circulating notes, and upon the mere appointment of a receiver.

3. Such an association may be sued though a receiver have been appointed, and is administering its concerns.

4. The decision of the receiver upon the validity of a claim presented to him for a dividend is not final; the creditor may proceed afterwards to have the validity of the claim judicially adjudicated in a suit in a proper state court, against the bank.

On the 3d of June, 1864, Congress passed its well known "act to provide a national currency, secured by a pledge of United States bonds," [Footnote 1] under which act numerous new

Page 81 U. S. 384

banks were organized, and numerous state ones, availing themselves of power given by the act, were converted into national ones, and like those first created by the act placed under the control of the laws and officers of the United States, including specially a Comptroller of the Currency, under whose directions a limited amount of notes were to be given to the banks, these notes being the only ones that the banks could issue.

The act, after providing for the mode in which the new banks were to be organized under articles of association, enacts:

SECTION 8. That every association formed pursuant to its provisions shall "be a body corporate," and "have succession by the name designated in its organization certificate for a period of twenty years from its organization, unless sooner dissolved.

"(1st.) According to the provisions of its articles of association, OR,"

"(2d.) By the act of its shareholders, owning two-thirds of its stock, OR,"

"(3d.) Unless the franchise shall be forfeited by a violation of this act."

"By such name,' continues the section, 'it may sue and be sued, complain and defend as fully as natural persons."

The 32d section, after enacting that all the banks in certain cities of the United States shall redeem their circulating notes at par in New York, provides:

"That nothing in this section shall relieve any association from its liability to redeem its circulating notes at its own counter, at par, in lawful money on demand."

The 46th section enacts:

"That if any such association shall, at any time, fail to redeem in the lawful money of the United States any of its circulating notes when payment thereof shall be lawfully demanded . . . , the holder may cause the same to be protested, in one package, by a notary public, . . . and such notary public on making such protest or upon receiving such admission shall forthwith forward such admission, or notice of protest, to the Comptroller

Page 81 U. S. 385

of the Currency. . . . And after such default, . . . It shall not be lawful for the association suffering the same to pay out any of its notes, discount any of its notes, or otherwise prosecute the business of banking, except to receive and safely keep money belonging to it, and to deliver special deposits."

The 50th section enacts:

"That on becoming satisfied, as specified in this act, that any association has refused to pay its circulating notes as therein mentioned and is in default, the Comptroller of the Currency may forth with appoint a receiver . . . who . . . shall take possession of the books, records, and assets of every description of such association, collect all debts, dues, and claims belonging to such association, and upon the order of a court of competent jurisdiction may sell or compound all bad or doubtful debts, and on a like order sell all the real and personal property of such association, on such terms as the court shall direct. . . . And such receiver shall pay over all money so made to the Treasurer of the United States, subject to the order of the Comptroller. . . . And from time to time the Comptroller, after full provision shall have been first made for refunding &c., . . . shall make a ratable dividend of the money so paid over to him on all such claims as may have been proved to his satisfaction, or adjudicated in a court of competent jurisdiction."

A proviso to this section says, however,

"That if such association against which proceedings have been so instituted on account of any alleged refusal to redeem its circulating notes as aforesaid, shall deny having failed to do so, such association may . . . apply to the nearest circuit or district or territorial court of the United States to enjoin further proceedings in the premises, and such court . . . after the decision of the court or the finding of a jury that such association has not refused to redeem its circulating notes . . . shall make an order enjoining the Comptroller or any receiver from all further proceedings on account of such alleged refusal."

The 45th section enacts:

"That all associations under this act when designated for that purpose by the Secretary of the Treasury, shall be depositories of the public money (except receipts from customs), under such

Page 81 U. S. 386

regulations as may be prescribed by the secretary; and they may also be employed as financial agents of the government, and they shall perform all such reasonable duties as depositories of the public moneys and financial agents of the government as shall be required of them."

The 52d section enacts:

"That all transfer of the notes, bonds, bills of exchange, and other evidences of debt owing to any association, or of any 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 for either, made after the commission of an act of insolvency, or in contemplation thereof, with a view to prevent the application of its assets in the manner prescribed by this act, 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."

The 53d section enacts:

"That if the directors of any association shall knowingly violate or knowingly permit any of the officers, agents, or servants of the association to violate any of the provisions of this act, all the rights, privileges, and franchises of the association derived from this act shall be thereby forfeited. Such violation shall, however, be determined and adjudged by a proper circuit, district, or territorial court of the United States, in a suit brought for that purpose by the Comptroller of the Currency, in his own name, before the association shall be dissolved."

The 57th section (and this is an important one to be noted in the case) enacts:

"That suits, actions, and proceedings against any association, under this act, may be had in any circuit, district, or territorial court of the United States, held within the district in which such association may be established or in any state, county, or municipal court in the county or city in which said association is located having jurisdiction in similar cases. Provided, however, that all proceedings to enjoin the Comptroller under this act shall be had in a circuit, district, or territorial court of the

Page 81 U. S. 387

United States held in the district in which the association is located."

In this state of statutory law about national banks, the First National Bank of Bethel, in Connecticut, on the 21st of February, 1868, failed to redeem some of its circulating notes. They were protested, and on the 26th of February a receiver was appointed under the above-quoted 50th section of the Currency Act, who immediately entered on the duties of his office.

The National Pahquioque Bank of Danbury, Fairfield County, in the same state, asserted that it was a creditor of the Bethel Bank, and presented its claim to the receiver. The receiver, however, disallowed it.

The Pahquioque Bank thereupon, on the 30th of May, 1868, brought assumpsit in the Superior Court of Fairfield County, a court of Connecticut having jurisdiction in similar cases, against the Bethel Bank. The Bank of Bethel defended itself against the claim on these, in substance, among other grounds:

1. That the courts of the United States alone had jurisdiction after the appointment and acceptance of the receiver.

2. That prior to the suit brought the Bank of Bethel had forfeited its charter by a violation of the Currency Act, in not paying its notes, and could not be sued anywhere.

3. That it could not be sued because it was, at the time, under the control and in possession of a duly appointed receiver, "incapable of self-defense, and entitled to the legal protection and guardianship thrown about it by the law."

4. That the decision of the receiver on the presentation of the claim was conclusive on the parties to the suit as an adjudication, unless set aside by the Comptroller of the Currency, or by some court of the United States having jurisdiction.

But the court give judgment for the Pahquioque Bank for the full amount of its claim. The Bethel Bank then took the case on error before the supreme court of the state, where the judgment of the Superior Court of Fairfield

Page 81 U. S. 388

County was affirmed. To review this final judgment of the Supreme Court this writ of error was brought.

Page 81 U. S. 391

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