The ruling in
Casey v. Cavaroc, supra, p.
96 U. S. 467, as to
what constitutes a valid pledge of securities, so far as third
persons are concerned, applied to this case.
This case arose upon a bill filed by Casey, receiver of the New
Orleans National Banking Association, to recover certain notes and
bills receivable claimed by the defendants, the National Park Bank
of New York, and E. H. Reynes & Brother, to be held by way of
pledge for certain advances made to the bank by the National Park
Bank of New York. This circuit court dismissed the bill, and he
appealed to this Court.
MR. JUSTICE BRADLEY delivered the opinion of the Court.
This case is, in all essential respects, similar to that of
Casey v. Cavaroc, supra, p.
96 U. S. 467. On or
about the 4th of June, 1873, E. H. Reynes, on behalf of the New
Orleans National Banking Association, applied to the National Park
Bank of New York for a loan of $150,000 upon the notes of the
former, to be secured by a pledge of collaterals. On the 11th of
June, the president of the Park Bank, at New York, addressed a
letter to Charles Cavaroc, president of the New Orleans National
Banking Association, in which he says:
"Mr. E. H. Reynes has made an application for a loan to the New
Orleans National Banking Association, to be secured by the bills
receivable of the bank. We will loan you $75,000, payable Oct. 10,
and $75,000, payable Oct. 20, next. As collateral to these notes,
select $170,000 of your bills receivable of best known names;
retain them as deposited by us, sending us a schedule and receipt
for them, as held in trust for us and subject to our order."
On the 11th of June, Cavaroc, as president of the New Orleans
Bank, sent to the Park Bank, in a letter, two notes of the former
for $75,000, each payable as agreed, and a list of notes
Page 96 U. S. 493
and bills receivable, amounting to about $170,000, with a
receipt appended thereto, as follows:
"NEW ORLEANS, June 11, 1873"
"Received, in trust, for account of the National Park Bank of
New York, from the New Orleans National Banking Association,
$170,084.42, of bills receivable described in annexed statement,
said bills receivable being given by the New Orleans National
Banking Association as collateral security of their notes, due
respectively on the 10th and 20th of October next, 1873, each for
the sum of $75,000, payable to the order of the National Park Bank
of New York."
"C. CAVAROC, President."
In the letter in which these papers were enclosed, Cavaroc,
after referring to the two notes, says:
"I further enclose statement of $170,084.42, of bills
receivable, held in trust and as collateral security for the
punctual payment of the obligations of the bank, with a receipt for
the same. As fast as the bills receivable will mature and be paid,
I beg the privilege of substituting new collaterals, of which due
notice will be given you."
The Park Bank, in a letter of June 17, assented to this request,
as follows: "You can make the change of collaterals you mention,
advising us of the same and that you hold the new paper the same as
the old,
viz., in trust." Thereupon the two notes were
discounted, and the Bank of New Orleans drew the money
therefor.
The bills receivable, specified in the list referred to, were
placed in an envelope by the note clerk handed to Cavaroc, and by
him handed to the cashier, who, for a while, kept them in the safe,
but afterwards delivered them back to the note clerk for
convenience of collecting and renewing those which matured. The
same substitutions of particular notes and bills were made from
time to time, as was done in case of the Societe de Credit
Mobilier, new lists were made, and finally they were delivered to
Cavaroc after the failure of the bank, who handed them to E. H.
Reynes & Co., to keep for the Park Bank of New York.
The bills were never removed from the bank, and were never
endorsed by it until the bank failed, and were always kept on the
portfolio of bills receivable, without any entry on
Page 96 U. S. 494
the books or in the reports to show that they had been
pledged.
It is evident that the same rule must be applied to this case
which was applied in that of the Credit Mobilier. There was no such
possession by or on behalf of the Park Bank as would constitute a
valid pledge as to third persons.
The decree of the circuit court must be reversed and the cause
remanded with directions to enter a decree for the complainant
below in conformity with this opinion; and it is
So ordered.
MR. JUSTICE SWAYNE, MR. JUSTICE FIELD, and MR. JUSTICE HARLAN
dissented.