Potter v. Bank of Ithaca — 5 Hill & Den. 490

Majority

p. 490

Potter and another vs. The Bank of Ithaca.

Headnote

Where the charter of a bank provided that its operations of discount and deposit should not be carried on elsewhere than in the village of Ithaca, and the cashier discounted a note at the city of New-York for the purpose of securing a demand due the bank: Held,, a valid note, and that the restriction- in the charter re. lated only to the customary and permanent business operations of the bank; not to an isolated transaction like the one in question. And see note (a.)

Though the cashier of a foreign banking corporation loaned money in the city of New-York on the borrower’s check ; held, not a violation of 1 R. S. 712, §-6j it appearing that the transaction was an isolated one, and that the corporation kept no office for banking purposes in this state. Note (a.)

Error to the superior court of the city of New-York, where the present defendants in error were plaintiffs. The action was on a promissory note made by the defendants below, payable to the order of and endorsed by T. S, Townsend. The note was discounted by the plaintiffs’ cashier at the city of New-York. The discount was made on the application- of one Hendrickson, an .endorsee, to whom the full amount of the note was paid by giving up an acceptance held by the bank against him and paying the balance in cash. The cashier acted- in behalf of the plaintiffs in discounting the note, and the usual entries in such cases were made in the books of the bank on the cashier’s return to Ithaca. The defendants? counsel objected to the plaintiffs’ right of recovery, insisting that they were prohibited by their charter from making discounts at any other place than the village of Ithaca. (Ness. Laws of 1829, p. 320, § 1.) The court below overruled the

p. 491

objection, and the defendants’ counsel excepted. The jury rendered a verdict in favor of the plaintiffs, and, after judgment, the defendants sued out a writ of error.

F. B. Cutting, for the plaintiffs in error,

cited The North River Ins. Co. v. Lawrence, ( 3 Wend. 482 ;) The People v. Trustees of Geneva College, (5 id. 211;) The Life and Fire Ins. Co. v. The Mech. Fire Ins. Co., (7 id. 31;) Mann v. Eckford’s executors, (15 id. 502.).

S. Sherwood, for the defendants in error.

The first section of the plaintiffs’ charter is' as follows; “ There shall be established in the village of Ithaca, in the county of Tompkins, a bank &c., whose operations of discount and deposit shall he carried on in the village of Ithaca, and not elsewhere.” (Sess. Laws of 1829, p. 320.) The provision obviously relates to the regular and customary business operations of the bank, and does not apply to a single transaction like the one in question.^[1] This is a sufficient answer to the objection taken in the court below; but it may be added; that the cashier was seeking to secure a demand due to the plaintiffs, and that the discount was made in the course of transacting that business. In this view, the act was clearly legal; for such transactions must of necessity often take place where the debtor may happen to be found.

Judgment affirmed.

(a) (a) The same doctrine was held in Suydam and others v. The Morris Canal and Banking Company, on error from the superior court of the city of New-York. (Sup. Court, July T., 1843, M. S.) The defendants in error, a corporation created by the laws of New-Jersey, sued the plaintiffs in error for money lent on a memorandum check. The loan was made by the cashier of the defendants in error at the city of New-York. By the 18th section of the charter of the defendants in error, it was provided that their banking operations should be carried on in the city of Jersey; and it was proved at the trial that they carried on banking business *492 there, but kept an exchange office in the city of New-York. The plaintifls in error objected, inter alia, that the loan was made in violation of the 18th section of the charter, and in contravention of the statute of this state to prevent unauthorized banking. (1 R. S. 712, § 6.) The court below overruled the objection, and the cause was submitted to the jury, who found a verdict for the amount claimed, on which judgment was afterwards rendered. The objections taken at the trial were re-argued before this court, and the judgment of the court below affirmed, Nelson, Ch, J., who delivered the opinion, observing: “ The sixth section of the statute relating to unauthorized banking has no application to the case. The pro, hibition contained in that section relates merely to the keeping of an office ‘ for the purpose of receiving deposites or discounting notes or bills,’ &c.; not to a single, isolated act of loaning money. (Pennington v. Townsend, 7 Wend. 276 , 279; New-Hope Delaware Bridge Company v. The Poughkeepsie Silk Company, 25 id. 648.) The same answer may be given to the objection that the eighteenth section of the charter of the company fixes the place of conducting their banking operations at the city of Jersey. The provision has reference to the customary and permanent business of the institution; and was surely not intended to prohibit a single act of loaning at a different place, where an officer of the bank might happen to be at the time.”

Cases cited

North River Insurance v. Lawrence 3 Wend. 482 N.Y. Sup. Ct. p. 491